Bolstered equity is a direct result of those actions, he noted: “Asset values have increased, which is a lot of that equity that these homeowners have built up. The Fed is doing what it can, which is increasing the cost of money to suck that back out into the economy so that asset prices and any sort of bubbles will either burst or at least come down to a more normalized environment.”
But that scenario won’t emerge overnight, as many of his clients understand: “We are working with homeowners now that have canceled their refinances and HELOC applications due to significant pricing changes and long-funding timeframes,” he said.
Indeed, rate hikes will spur along a decline in the HELOC realm, he said. “For years, HELOC activity has been declining and rate hikes will only accelerate that trend,” he said. As a result of the Fed’s moves, he explained, banks originating HELOCs have gradually constrained their lending criteria – thus making for a stricter qualification process.
“Income, debt-to-income ratios and credit score requirements have increased dramatically from a few years ago,” he noted. “Alternative products have emerged to serve those that financial institutions are leaving behind.”
That stuff about any rate-hike-spurred changes taking a while to bake into the economy is being felt by would-be homeowners – arguably the group bearing the fullest brunt of economic uncertainty. “Predicting housing stock availability in your area, home prices, interest rates, borrowing qualifications, and physically moving is becoming harder and more uncertain,” he said. “Unfortunately, homebuyers are facing headwinds on multiple fronts with little reprieve in sight.”
Source: mpamag.com