People Want to Buy, Sell and Refinance, but Will They be Able to?
Written By: Joel Palmer, Op-Ed Writer
People are eager to sell their homes. Potential buyers remain fairly confident that now is a good time to do so. And 19 million homeowners can still benefit from refinancing due to low mortgage rates and sufficient equity.
The question is whether those sentiments will result in significant volume for mortgage processors and underwriters.
Last week, Fannie Mae released its September Home Purchase Sentiment Index, showing that the index increased in September for the second consecutive month.
According to the survey, 54 percent of respondents say now is a good time to buy a home, though that’s down from 59 percent the month before. The percentage who say it is a bad time to buy increased from 35 percent to 38 percent.
Conversely, the percentage of respondents who say it is a good time to sell a home increased from 48 percent to 56 percent, while the percentage who say it’s a bad time to sell decreased from 44 percent to 38 percent.
Further evidence of optimism in the mortgage market is that 83 percent of respondents say they are not concerned about losing their job in the next 12 months. That’s an increase from 78 percent the previous month.
The HPSI comes on the heels of existing homes sales in August that reached their highest level since December 2006. In addition, the National Association of Realtor’s Pending Home Sales Index hit a record in August.
Even with the positive indicators, there is one ongoing issue that can limit origination volume over the next several months.
“Going forward, we believe the wild card to be whether enough sellers enter the market to continue to meet the strong homebuying demand,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “The home purchase market requires the proper mix of home price growth and continued economic recovery to achieve sustainable levels of housing activity.”
What about refinances? The average 30-year rate is below 3 percent and 15-year rates are averaging around 2.35 percent.
According to Black Knight, a mortgage technology, data and analytics provider, there were 19.3 million homeowners last month who were prime candidates for refinancing. This was an all-time high, the company said. Black Knight defines high-quality refinance candidates as 30-year mortgage-holders with credit scores of 720 or higher, who hold at least 20 percent equity in their homes and are current on their mortgage payments and who stand to shave at least 0.75 percent off their first lien rate by refinancing.
While this sounds like a golden opportunity for mortgage processors and underwriters, Forbes recently asked the question why so many homeowners haven’t taken advantage. Some of their reasons seem to indicate that few refinance candidates may actually take the opportunity to do so.
Forbes said one possible reason is that people have relied more on credit during the pandemic and have higher debt-to-income ratios. Closing costs and the arduous process of refinancing may also be discouraging potential refinance candidates, according to Forbes.
Also, while the potential monthly savings can be $300 to nearly $500 in some high-value markets, they are much less in other areas for the country. For example, the five states where people would save the least from refinancing include Indiana and Nebraska (average savings of $197 a month), Iowa ($202), Arkansas ($203), and Oklahoma ($208).
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
