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VOL. 45 | NO. 30 | Friday, July 23, 2021

Fannie, Freddie take a load off by dropping 0.5% fee

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In 2012, interest rates for 30-year mortgages dipped to less than 4% for the first time in history, a full 14 points less than the 18% rate of 1981. When this phenomenon hit nine years ago, homeowners sprinted to their favorite mortgage lenders to refinance their homes at the new rates.

When rates drop, buying power increases as the same monthly payment can cover a larger loan. Many felt that once the existing loans were refinanced in 2012 and 2013, and since new homes were being financed with the lower interest rates, the refi market would evaporate.

But with interest rates jumping from slightly less than 3% and the back to 4%, the refinances continue.

Jill Hall, a veteran real estate broker-turned-loan officer with Accurate Mortgage, notes that “purchase loans for the second quarter were up 10%, while refinance loans were down 9%.”

Of note, cash-out refinances doubled in June and July compared to term refinances, Hall says. Hall, a person well-respected in her field, also notes “the biggest mortgage news was revealed Friday, and that is that the adverse market fee for refinances will be removed on Aug. 1.”

The adverse market fee added 0.5% to loan costs when refinancing. Added in 2020 by both Freddie Mac and Fannie Mae, the adverse marketing fee and its cost will be eliminated in August, perhaps causing another refinance spike.

The removal of the fee should allow interest rates to drop by approximately 0.25% during the life of the loan, Hall says.

A surge in refinances would indicate homeowners are renovating rather than selling, thereby exacerbating the inventory issue plaguing the real estate market. Last week it was reported that June sales were higher than the number of homes in inventory at the end of May.

A person taking issue with the report noted there were more houses to come on the market in June than in any month since they have been tracking such things. Chances are, he is right about the number of homes entering the market last month, all of which translates to the fact the market is even stranger – and stronger – than anyone thought.

To recap, there were more sales in a month than the inventory level at the end of the previous month, and there were more listings coming online during the month than ever before. Take the inventory, add the new listings, subtract the sales and it is a number less than the inventory.

It seems it should be about time to forego the forbearances. Restaurants are closing due to lack of employees, and unemployment is at 5.9%, down from 11.1 a year ago.

Economist extraordinaire Elliot Eisenberg says many of those in the forbearance program have realized significant appreciation in their properties. If they sold their homes, they could reap rewards, even though they had not paid their mortgages during the past year because of the pandemic.

Had they been forced to sell last March, it could have been catastrophic for the sellers and their families, not to mention the economy. Now, however, they would have billions to pour into the world’s coffers.

Another option would be to go back to work, call Jill Hall or one of her peers and refinance, pull some cash out of the transaction and save tons of money in the process.

Sale of the Week

Add 3521 Trimble Road to the list of properties selling for more than list price.

3521 Trimble Rd

The home sold last week for $1.325 million a couple of days after George Rowe listed it for $1.2 million. Located in the heart of Green Hills, the owner had purchased his residence in 2011 for $500,000.

Certainly, the stories of the hundreds of homes selling at more than list price in record time are exciting and circulating among the community, but all homes are not experiencing the same success. Last week in the 37205 ZIP code, nine sales were recorded with only one for more than list price.

In Green Hills, the neighborhood that includes Trimble Road, there were 12 closed sales last week with seven going for over list price and three hitting the listing price on the button, and one selling for less than asking price.

The home at 3521 Trimble Road was attached to its neighbor and part of a horizontal property regime, meaning it is a mini condominium consisting of at least two homes on a common lot. With its sales price at $380 per square foot, there apparently is no stigma attached to homes that share common walls.

Listing agent George Rowe, one of a very few Realtors brandishing a law degree, says the home includes “beautifully renovated primary bathroom, an extra-large closet all on the main level.” The structure’s 3,489 square feet includes four bedrooms, three full bathrooms and one half bathroom. When not selling homes, Rowe is the managing broker of Compass Tennessee.

Callie Hughes is a rare native Nashvillian, a group whose proportionate number are shrinking by the day as the New Yorkers and Californians have been joined by the Chicagoans and Minnesotans in the race to the It City. A graduate of Harpeth Hall and Belmont University, Hughes has a sense of the evolution of Nashville. Her motto is “answer the phone.” That practice also places her in the minority.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty, LLC and can be reached at richard@richardcourtney.com.

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