Even with record low mortgage rates it's not producing home buying. In fact, home buying is at record lows.
And here are two good reasons:
Eleven million residential properties are worth less than the mortgages on them. Nearly 15 million Americans are unemployed.
And the home ATM machine is slowing down.
These days, households that refinance often treat their homes like piggy banks: They're plopping money in and not taking money out. Freddie Mac estimates that they took out only $8.3 billion in the second quarter of this year, down from $21.8 billion a year earlier. Just 27% of households that refinanced Freddie Mac mortgages took cash out in the second quarter of this year (compared with 84% three years earlier); 22% put cash into their homes in the second quarter — the third-highest cash-in rate since Freddie Mac started keeping records in 1985. Sometimes they brought money to the table because their homes were underwater and they couldn't refinance otherwise, says Freddie Mac chief economist Frank Nothaft.
Homeowners are also shortening the terms of their mortgages so they can build equity and pay off their mortgages faster. In the second quarter, 30% of homeowners refinancing 30-year, fixed-rate mortgages switched to 15- or 20-year mortgages, often absorbing higher monthly payments in exchange for owning their homes free and clear years earlier and saving tens of thousands of dollars in interest over the long haul.
There is even discussing to allow all mortgages backed by Fannie Mae and Freddie Mae to refi. That means homes that are currently have negative equity could refi.
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