THE “HALF-EMPTY” PERSPECTIVE: It is estimated that more than 50 percent of American homeowners are either in or near a negative equity situation. And if all that is not bad enough, check out the latest news:

•  U.S. mortgage applications plunged to a seven-month low last week as demand for home refinancing loans tumbled 30 percent, data from an industry group showed on Wednesday.
• The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended June 26 decreased 18.9 percent to 444.8, the lowest reading since the week ended November 21, 2008.

So why is all of this happening? In addition to plummeting home values, sicking employment rates, and tons of toxic assets on the banks books,  these dismal facts reflect the strict scrutiny that refinances are currently undergoing, with respect to undervalued and/or depressed appraisals, even regarding those 50 percent that have positive equity in their homes.

For example, if you had 40 percent equity, and your property value dropped 30 percent in the last two years, you still have 10 percent left. However, that may not be enough Loan To Value (LTV) to refinance and benefit from the lower rates, given the more stringent bank lending criteria. The pendulum has most definitely swung to the conservative side of the ledger.

So the question is, are there “existing” systems in place to find and motivate the other 50 percent of homeowners and home buyers that actually qualify for financing?

THE “HALF-FULL” FACTS:

• According to the latest statistics by the Federal Reserve, U.S. homeowners still have more than $8 trillion of home equity remaining—even after the record plunge in home sale prices.
• American households still have an aggregate net worth (assets minus liabilities) of $56 trillion.

So keep in mind, there are still many Americans who have positive equity in their homes. The only question is where are they, do they qualify with respect to enough positive equity to meet the more rigorous LTV bank lending ratios, and are they even interested in taking action?

Just something to think about ….

Tags: Negative Equity, New Refinance Opportunties, Underwater

Posted in LTV, Refinance, Residential Real Estate, Historical Perspective, Market Trending | No Comments