Pending Home Sales and Refinance
Today's pending home sales of existing homes fell to a new low in February per this morning's issued report by the National Association of Realtors. The index reading of 84.6 marks the lowest reading since the index began. How does this affect refinance?
Answer: Property values, not to mention the negative economic sentiment created. Continued negative sentiment in the housing markets will continue to restrict capital infusion by banks and investors into the mortgage market. Money will stay on the sidelines or head to the safety of bonds, among other safe-haven investments. Investors would rather have a relative smaller return on their money than to bear the risk of higher yields in the mortgage market, when property values are decreasing.
Simply put, housing values are based on supply and demand. When sales are low, it means that supply is outweighing demand. The home that would have had a buyer for $350,000 in 2005, now has no buyers at $330,000. This leads to a lower apprasied value for homes because the largest determing factor of a home's worth is what similar properties in that same area recently sold for. A lower appraised home value can lead to higher interest rates, additional mortgage insurance, or outright denial of a home refinance, depending on the particulars of the loan.
An important note. It's important to keep in mind that just because the average home value is decreasing nationwide, does not mean that your home has decreased in value. Depending on what region of the country you live, or even the neighborhood where you reside, can make a huge difference. There are still many homeowners that have not experienced a decrease in home value. Some have even had increases in market value during the past year.
Although home sales continue to get worse, we may be witnessing the capitulation that we need to form a bottom in the market. Once this occurs, I feel that the economy will finally reach recovery mode and the economic good times will roll again.
The author is a contributing mortgage consultant with the popular Refinance Tool Box. Visit today for free information and tools provided to help you learn about mortgage refinance.
Answer: Property values, not to mention the negative economic sentiment created. Continued negative sentiment in the housing markets will continue to restrict capital infusion by banks and investors into the mortgage market. Money will stay on the sidelines or head to the safety of bonds, among other safe-haven investments. Investors would rather have a relative smaller return on their money than to bear the risk of higher yields in the mortgage market, when property values are decreasing.
Simply put, housing values are based on supply and demand. When sales are low, it means that supply is outweighing demand. The home that would have had a buyer for $350,000 in 2005, now has no buyers at $330,000. This leads to a lower apprasied value for homes because the largest determing factor of a home's worth is what similar properties in that same area recently sold for. A lower appraised home value can lead to higher interest rates, additional mortgage insurance, or outright denial of a home refinance, depending on the particulars of the loan.
An important note. It's important to keep in mind that just because the average home value is decreasing nationwide, does not mean that your home has decreased in value. Depending on what region of the country you live, or even the neighborhood where you reside, can make a huge difference. There are still many homeowners that have not experienced a decrease in home value. Some have even had increases in market value during the past year.
Although home sales continue to get worse, we may be witnessing the capitulation that we need to form a bottom in the market. Once this occurs, I feel that the economy will finally reach recovery mode and the economic good times will roll again.
The author is a contributing mortgage consultant with the popular Refinance Tool Box. Visit today for free information and tools provided to help you learn about mortgage refinance.
posted by Jim Bisnett at
12:55 PM
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