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A downside to the refinancing bubble?

 

NEW YORK – March 17, 2014 – Homeowners who refinanced when fixed mortgage rates inched in record territory below 4 percent may be less likely to sell their homes as interest rates climb, according to a recent survey of 1,900 Americans by the Seattle-based real estate brokerage, Redfin.

If so, tight inventories of homes for-sale may persist. Homebuyers said that “low inventory” topped their list of frustrations in the housing market, according to the survey.

While those who nabbed a low-refinance rate may want to keep their homes, they may opt to rent them out instead of sell. According to Redfin’s survey, 39 percent of homeowners said they planned to buy a home and rent out an existing-home instead of selling it.

“Many of my home buying clients refinanced and locked in a very low mortgage rate in recent years,” says Taylor Connolly, a Redfin real estate professional based in Baltimore. “The low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month, so they are going for it. … Keeping their old home means they won’t have to risk becoming temporarily homeless like those whose homes sell quickly but can’t find a new home before they have to move out.”

Source: “Fallout From Refinancing,” The New York Times (March 13, 2014) and “39% of Buyers Prefer to Rent Out Their Last Home Rather Than Sell,” Redfin (Feb. 27, 2014)

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