Due to Rising Home Prices, 850,000 Houses Regain Positive Equity
After five weeks of gains, average mortgage rates have finally fallen this week. Mortgage rates have been on a tear, moving higher for the past five consecutive weeks. Average conventional 30 year mortgage rates increased from a low of 3.35 percent in the beginning of May to an average rate of 4.18 percent, a gain of almost 60 basis points in a matter of weeks.
Mortgage rates today on 30 year conventional mortgages are now averaging 4.06 percent, down from last week's average rate of 4.18 percent. Rates declined today due to lower 10 year bond yields. 10 year bond yields dipped considerably yesterday as investors retreated from equities and bought bonds as bond prices move higher bond yields move lower.
Mortgage Rates Increase the Past Month
Higher mortgage rates over the past month hasn't slowed down demand for homes and a low number of homes for sale in inventory is sending home prices rapidly climbing higher. As home prices increase, homeowners are regaining positive equity in their homes.
1.7 Million Homeowners Regain Equity the Past Year
CoreLogic, a real estate analytic company, reported in their Equity Report that for the first quarter of 2013, 850,000 homeowners regained positive equity in the their homes because of higher home prices. Dr. Mark Fleming, chief economist at CoreLogic, said:
During the past year, 1.7 million homeowners have regained positive equity. We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring.
Although 1.7 million homeowners now have positive equity again, there are still 9.7 million of homeowners with negative equity. The 9.7 million represents 19.8 percent of all residential properties with a mortgage. A staggering number of homeowners who are basically stuck in their home, they can't "trade up" to a larger home or move to another area of the country.
These owners are also unable to refinance their mortgage to a lower refinance rate. Late in 2012 and early in 2013 refinance rates have hit record lows on both conforming and jumbo mortgages. Not being able to sell, move, or refinance is causing a drag on the economy. If home prices continue to rise, millions more homeowners will regain positive equity in their home but will still be unable to refinance.
Loan-to-Value Ratio When Refinancing
Most banks will only refinance a mortgage if the homeowners has at least 10 t0 20 percent equity in their home, so just regaining positive equity won't necessarily help them to refinance. This is know as the loan-to-value ratio or LTV. When refinancing to take cash out, the requirement is to have at least 20 percent equity.
Compare Rates When Buying or Refinancing
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RatesORama.com Average Mortgage Rates