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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (86981)	8/24/2007 7:22:33 PM
From: MulhollandDrive	Respond to of 306849

Why is it that not one person on SI admits that they've used their house as an ATM in the last five years yet it seems almost everyone here is convinced everyone else is doing this? um, because it's probably true????? i'm going by the statistics i read in the agencies that track these numbers, not by what i read anecdotally here on SI (it would serve you well to do the same, i know how you love your spreadsheets) i am suggesting that cashout re-fi's which as of nov 1, 2006, hit a 16 YEAR HIGH, have hit a wall....that, imo, is a huge source of consumer spending that has for the time being, been tapped out freddiemac.com or Immediate Release November 01, 2006 CONTACT: corprel@freddiemac.com or (703) 903-3933 REFINANCE ACTIVITY REMAINS HIGH; CASH-OUT SHARE INCREASES IN THIRD QUARTER Cash-out Figures At Highest Level In 16 Years McLean, VA – In the third quarter of 2006, 89 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This percentage is up from the second quarter of 2006, when the share of refinanced loans that took cash out was a revised 88 percent, and is the highest since the second quarter of 1990. "Mortgage borrowers continue to refinance their mortgages at a higher frequency than historically would have occurred given the rise in mortgage rates over this year," said Frank Nothaft, Freddie Mac vice president and chief economist. "But the wide proliferation of adjustable-rate mortgages (ARMs) originated in the past few years that are nearing their first interest-rate adjustment provides borrowers an incentive to refinance into a lower-cost ARM or fixed-rate mortgage. In addition, borrowers who might have considered a prime rate home equity loan for a home improvement or other need are turning to cash-out refinance options now that the prime rate is above 8 percent. "While the refinance share of applications is still strong, the share of all mortgage applications that were for refinance did slip for the third consecutive quarter to 41 percent from 42 percent in the second quarter of 2006, according to Freddie Mac's Primary Mortgage Market Survey®." Through the first three quarters of 2006, 30-year fixed mortgage rates have averaged three-quarters of a percent higher than over the same period in 2005 and now average close to 6.4 percent. Freddie Mac expects 30-fixed mortgage rates to average between 6.4 and 6.6 percent through the end of 2007 and initial rates on 1-year Treasury-indexed ARMs to hover between 5.4 and 5.5 percent. In the third quarter of 2006, the median ratio of new-to-old interest rate was 1.12. In other words, one-half of those borrowers who paid off their original loan and took out a new one increased their mortgage coupon rate by 12 percent, or roughly three-eighths of a percentage point at today's level of fixed mortgage rates. This is the highest ratio since Freddie Mac began compiling this information in 1985. "High demand for cash-extraction through refinance is being driven by the high cost of home-improvement loans and home-equity lines of credit, that is, the cost of alternative financing, and still-strong demand for home improvements," said Amy Crews Cutts, Freddie Mac deputy chief economist. "This quarter we saw $82.8 billion cashed out, down from a revised $90.6 billion cashed out in the second quarter of 2006. Cash out refinance volume is expected to decline further in the fourth quarter to less than $65 billion, due to lower expected refinance shares overall and lower mortgage origination activity. "To attract homeowners interested in accessing accumulated home equity but not ready for a refinance of their first-lien mortgage, banks are now starting to offer more creative financing for home-equity lines, with many offering a fixed-rate line of credit option at or below the prime rate. These fixed-rate second-lien alternatives, which protect borrowers from future interest-rate increases, may reduce interest in cash-out refinances of existing first-lien fixed-rate mortgages. However, if borrowers are already refinancing to avoid an interest-rate increase on their adjustable-rate mortgage, they may opt to extract a little cash while they are at it." The Cash-Out Refinance Report also revealed that properties refinanced during the third quarter of 2006 experienced a median house-price appreciation of 33 percent during the time since the original loan was made, down from a revised 34 percent in second quarter 2006. For loans refinanced in the third quarter of 2006, the median age of the original loan was 3.4 years, about two months older than the median age of loans refinanced during the second quarter of 2006. These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase. The Freddie Mac analysis does not track the use of funds made available from these refinances. QUARTERLY REFINANCE STATISTICS Percentage of Refinances Resulting in: Descriptive Statistics on Loan Terms and Property Valuation Quarter 5% Higher Loan Amount1 Lower Loan Amount Median Ratio of New to Old Rate2 Median Age of Refinanced Loan (years) Median Appreciation of Refinanced Property 199902 56% 13% 0.88 4.7 12% 199903 68% 11% 0.95 5.4 18% 199904 77% 9% 1.02 4.9 21% 200001 80% 7% 1.07 5.0 22% 200002 80% 8% 1.10 4.8 24% 200003 81% 8% 1.09 4.6 26% 200004 74% 10% 1.02 3.5 23% 200101 53% 8% 0.87 1.6 12% 200102 60% 9% 0.87 2.5 16% 200103 61% 10% 0.88 2.7 18% 200104 47% 19% 0.84 2.8 14% 200201 61% 10% 0.86 3.4 18% 200202 63% 10% 0.88 3.4 20% 200203 44% 19% 0.84 2.9 13% 200204 40% 22% 0.82 2.4 11% 200301 41% 13% 0.81 1.9 7% 200302 33% 15% 0.79 1.7 3% 200303 34% 17% 0.78 1.7 5% 200304 44% 21% 0.82 2.2 12% 200401 42% 14% 0.82 2.0 6% 200402 43% 15% 0.83 2.0 8% 200403 59% 15% 0.88 2.5 17% 200404 57% 19% 0.88 2.2 16% 200501 64% 10% 0.89 2.4 17% 200502 72% 9% 0.92 2.5 23% 200503 73% 10% 0.93 2.6 24% 200504 81% 8% 0.98 2.9 29% 200601 86% 5% 1.02 3.0 31% 200602 88% 5% 1.08 3.2 34% 200603 89% 5% 1.12 3.4 33% Notes: 1Higher loan amount refers to loan amounts that were at least 5 percent greater than the amortized unpaid principal balance (UPB) of the original loan. "Lower loan amount" refers to loan amounts that were less than the amortized UPB of the original loan. 2Ratio of old to new rate refers to the ratio of the interest rate of the refinanced loan to the interest rate of the new loan. These data can be found at www.FreddieMac.com/news/finance/data.html. For more information, contact us at chief_economist@freddiemac.com Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than four million renters in America. © 2007 Freddie Mac Print This Page

To: GraceZ who wrote (86981)	8/24/2007 7:22:51 PM
From: Think4Yourself	Respond to of 306849

re: Why is it that not one person on SI admits that they've used their house as an ATM in the last five years yet it seems almost everyone here is convinced everyone else is doing this? The folks posting here are a different breed, almost by the definition of their being here. You aren't likely to find the stupid, self absorbed, no equity, wanna get rich quick without working sheeple posting here. You will tend to find the financially stable, don't follow the crowd, make their own decisions type of people here. If you want to see the stupid sheeple we refer to, or at least the ones I refer to, there are lots on the Yahoo threads. they tend to post in all caps, and post emotions rather than facts. They are wildly bullish at the top and extremely bearish at the bottom.

To: GraceZ who wrote (86981)	8/24/2007 7:49:13 PM
From: Jim McMannis	Respond to of 306849

I don't have any home equity loans but I do know a number of people that do. Some even bought overpriced RE with the money. Real Estate is a great long term investment right? They weren't supposed to do that according to the terms of the loan. I've seen it break a few but most will survive. None post on SI.

To: GraceZ who wrote (86981)	8/24/2007 7:56:22 PM
From: benwood	Respond to of 306849

How many people are on SI and how many of those made such a denial? Just wondering how extensive your research into this has been. I personally have only known one who went back to the well over and over in the cliche of ATM withdrawal and spending spree, three times in three years up until 2003 and then I lost track of her. Another did so one time, to lower payments and extract cash to pay off a credit card. SI is, believe it or not, well above average in fiscal savvy. I'd expect the MEW numbers here to be far less, except for a few who simply withdrew to speculate. Most of them disappeared by September of 2000.

To: GraceZ who wrote (86981)	8/24/2007 9:16:48 PM
From: saveslivesbyday	Read Replies (2) \| Respond to of 306849

"Why is it that not one person on SI admits that they've used their house as an ATM" Nobody every asked me. We remodeled our home in 2000-2002, had it reappraised, refininaced twice with the falling interest rates, and then took out a HELOC to buy rental houses over the period of 2002-2005. However, in each case we paid 20% down on conventional mortgages for SFH's that were cash-flow positive and that each clearly had good ROI. We paid the HELOC off each time inbetween purchases. I consider this as a leveraged long term investment - with accumulating deferred passive tax benefits. The point is - we paid off the HELOC, and for goodness sakes didn't use it to buy a new car or color TV ......

To: GraceZ who wrote (86981)	8/24/2007 10:59:08 PM
From: lifeisgood	Respond to of 306849

Why is it that not one person on SI admits that they've used their house as an ATM in the last five years yet it seems almost everyone here is convinced everyone else is doing this? Because their computers were from rent-a-center and they've been repoed so they can't post on SI anymore <g> My house is paid off too but for how many younger people is that true? I know many people who used their house for an ATM. They aren't in trouble because they had considerable equity prior. However, it will be a long time before THEIR house is paid off. On another note, the carnage that ARM resets will cause may be delayed for a short while since people will find ways to pony up the extra money for a few months (e.g., by spending WAY less, defaulting on car loans, maxing out the CC's, eating lots of Ramen Noodles). best... LIG