You know what’s keeping the Title Companies going don’t you—all those re-fi’s. Mortgage rates are at record lows, and the rule of thumb is that if you recoup the cost of refinancing in a year or two and plan to stay in the home past that time frame, refinance when rates are at a historic low and save money.
Of course, as Steve Brown points out, that formula doesn’t work if you are underwater on your mortgage. That is, you owe more than the home is worth. This is the scenario where you bring in a nice pile of cash to the refinancing table—few want or are able to do that.
Fortunately, that scenario is dwindling in Texas. According to the folks who track this at CoreLogic, three-fourths of U.S. homeowners who are underwater in their loans are stuck paying higher interest rates. Stuck because unless they take cash to refinance, it ain’t happening.
Steve says only 12 percent of Dallas homeowners, or 90,000 borrowers, are now underwater. I cannot tell you how good that is. We’ve come a long ways, baby: in 2009, almost 30 percent of Dallas mortgages were underwater.
The national numbers are far higher: 22.5 percent of home borrowers — 12 million people — are underwater on their mortgages. They bought or borrowed on their home when the prices were too high. 40 percent of underwater borrowers hold HELOCs, or home equity loans.
Experts say high negative equity is one of the main things hurting the housing recovery, holding back refinancing and sales.
How did we get our numbers whittled down? The homes went into foreclosure, were bought up by investors, and the underwater homeowners started a new financial chapter in their lives.
The top states for upside-down mortgages continue to be the bad-boy sand states: Nevada, where 60 percent of the houses are worth less than the debt on them; Arizona, 49 percent; and Florida, 45 percent. I don’t even want to think about Detroit.
Of course, those are also the states where investors can pull their greatest returns on rental properties.
In Texas, 10 percent of home loans are underwater and an additional 5.1 percent are near negative equity. Wonder when we’ll start hearing this nugget from the Perry campaign?