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Housing ATM is Back (But it won't work any better this time)

It makes little sense to refi at these rising rates. But here we are.

Refis at 8-Year Lows

With mortgage rates rising, one would expect refi activity to slow. And it has: Refi Applications are at an 8-Year Low.

But why is there any refi activity all at all?

In September 2017 the MND mortgage rate rate was 3.85%. In June 2016, the MND rate was 3.43%.

It makes little sense to refi at 4.70% when one could have done it less than two years ago a point and a quarter lower.

At these rates, refi activity should be in the low single digits. Yet, 36% of mortgage applications are refis.

Housing ATMs

Are people pulling money out of their houses to pay bills?

That's how it appears, as Cash-Out Mortgage Refis are Back.

What's Going On?

  1. People feel wealthy again and are willing to blow it on consumption
  2. People pulling money out to invest in stocks or Bitcoin
  3. People are further and further in debt and need to pull out cash to pay the bills

I suspect point number three is the primary reason.

Regardless, releveraging is as wrong now as it was in 2007. Totally wrong.

Mike "Mish" Shedlock

The thought those forgetting the lessons of the past are doomed to repeat it rapidly comes to mind when I look at the economy of the year 2018. While we constantly refer to the "2008 financial crisis" it has been chiefly forgotten and we have learned very little. By this, I'm pointing to the true harsh reality and its details. The so-called great recession blamed by many on a crisis in housing is now so far in the rearview that many people see it as merely a reset from which we have moved on. The article below is a stark reminder that we may have learned nothing.

Mish FYI: This is the new NY Fed paper on equity extraction.

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