About 40 million mortgaged homes have at least 5 percent equity, meaning they may be eligible to be refinanced. In the second quarter, 11 percent of new mortgages bought by Fannie Mae, the largest U.S. home-loan finance company, had equity of 10 percent or less, according to regulatory filings.
Another 11 million borrowers can't move and can't refinance because their mortgages are bigger than the value of the homes that secure them, according to CoreLogic Inc., a Santa Ana, California-based real estate research firm. About 2.4 million have equity of 5 percent or less. A government effort known as Home Affordable Refinance Program allows homeowners who are up to 25 percent underwater to get new loans.
Homeowners who commit to stay in place are investing in inexpensive renovation projects, as people make do with what they have. Of the 125 million households that remodeled last year, 40 percent spent less than $1,000 and 60 percent spent less than $3,000, Census Department data show. Permits for remodeling jumped 24 percent to a record in July, according to BuildFax, an Austin, Texas-based real estate data company.
Turning To Remodels
Owners "are more and more turning to renovating and remodeling their current properties," said Joe Emison, head of research and development at the real estate data company.
Every 1 percent decline in mortgage rates makes 3 million more people eligible to refinance, as income and debt loads are measured against the rate, though not all of them will apply for home loans, said Yun.
"One good side of a slowing economy is interest rates have continued to fall, creating high demand for refinancing activity," said David Stevens, the former head of the Federal Housing Administration who six months ago became president and CEO of the Mortgage Bankers Association, said at the conference. "It may be the only good side."