rate of refinancing rises
The Office of Housing Enterprise Oversight (OFHEO) in its quarterly same-house market report last January, stated, sort of in passing, that the rate of housing appreciation declines as the rate of refinancing rises. The report does not offer a reason for this phenomenon, nor does OFHEO, which has regulatory oversight of Fannie Mae and Freddie Mac, appear particularly concerned, but the reason seems fairly transparent. Many people who are refinancing have sufficient equity so that, even if with a cash out for debt consolidation or other reasons, may not have a critical need to hit a value point (the amount of the desired mortgage). However, in many home purchases buyers are being qualified based on a certain amount of down payment. For someone putting 20 percent down, a low appraisal might reduce the loan to value (LTV) to 85 percent and force the buyer to pay for Private Mortgage Insurance (PMI). For buyers with only 5 percent to put down, a low appraisal may end their homeownership dream and the lender’s commission. In many refinances an appraiser doesn’t have to push very hard to find comparables that will allow a comfortable loan to value for the proposed mortgage.