But while affordability for buyers is weakening, rising home values are benefiting homeowners who chose to stay put. They cashed out $22.6 billion in home equity in the second quarter of this year, the largest amount since the middle of 2009, according to Black Knight Financial Services. That may sound like a lot, but it is still nearly 80 percent less than the peak of cash-out refinances in the third quarter of 2005, the height of the housing boom. It is not even close to what borrowers could have taken out.
"Given that we saw over $550 billion in tapable equity growth last year alone, this equates to borrowers only tapping into 15 percent of the growth in equity over the past 12 months, without even touching the $4.5 trillion balance in tappable equity available," said Ben Graboske, executive vice president of Black Knight Data & Analytics. "All in all, it's clear that cash-outs are helping to prop up the refinance market — their 42 percent share is up from only 30 percent in early 2015 when interest rates had also dropped."
Not only are today's borrowers far more conservative, it is just plain harder to qualify for a cash-out refinance today than it was during the loose lending days of 2005. The average FICO credit score among cash out refinancers today is about 748, well above the average score.
Mortgage rates remain near record lows and show little sign of any major gains. This should keep refinance volume elevated, as homeowners priced out of a move up decide to take cash out to remodel. Fall is a traditionally slower and less competitive time of year for buyers, but that is not the case this fall. Inventory continues to drop and homes for sale are moving faster and faster.