American homeowners are on the mad money grab with interest rates at historic lows and home values back at pre-bubble prices.
That is atleast what it looks like after this CNBC article: Refinances Surge as Homeowners Pull out most Cash in 12 Years
Here's the Highlights:
- Refinance lending has nearly doubled over the past three quarters, according to Black Knight.
- Cash-out refinances were up 24% since the last quarter of 2018 and made up 52% of all refinances.
- Homeowners withdrew a collective $36 billion in home equity, the highest amount in nearly 12 years.
THIRTY SIX BILLION! That is nothing to sneeze at when we are talking equity pulled out of homes. Clearly home prices continued higher over the past year.
What blew my mind about this report was the amount of mortgages that were originated in 2018 that were already doing a refinance. It was 1 out of 5 mortgage refinances. These are loans that are roughly a year old...that is some serious appreciation and drops in interest for that to happen.
Interesting times in the real estate market.
interesting times indeed. I did not know that. makes you wonder.
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Makes you wonder for sure!
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Is this a good thing or a bad thing? Seems the latter since home owners is leveraging more than they did in 2007. A start of a bubble burst?
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Its interesting data because it doesn't necessarily mean the wheels are going to fall off but it does mean the getting has been good and as we know the party can't go on forever.
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If they took the cash out it continues the debt cycle. If they (home owners retained their equity, that would like be a boost to the economy for the longer term)
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Refinance it again and again and again, ask for more and more loans, and then cry when the bubble bursts... I see so many real estate investors who are over leveraged, if the market shakes even a little I think most of these people won't be able to manage their debt.
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Exactly! I am a real estate investor and my fellow investors think I play it too safe because I always want to maintain 25% or more equity in my properties and have a good chunk of cash on reserves.
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Bigger Pockets has an entire technique developed around this called something like the BRRR where you buy rent repair refinance and use that money to buy your next rental.
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