Lower rates create higher demand for mortgage services

Corpus Christi home sales aren't booming. They're steady. But real estate appraiser George N. Paraskevas is busier than he has been in years.

As refinancing reaches record proportions across the nation, Paraskevas and other local appraisers, whose business it is to asses home value for mortgage seekers, are in hot demand. "I'm busy," Paraskevas said.

Typically, the bulk of his work comes from new mortgages. But a majority of the houses he's appraising these days aren't for sale.

About 60 percent of his business lately comes from homeowners needing their homes appraised for refinanced mortgages, with 20 percent coming from new home sales and the remainder from existing home sales.

And that seems to be in line with national industry reports.

Appraisers and the mortgage industry saw a shift a few months ago when interest rates began dropping and homeowners everywhere rushed to trade their old mortgage for a cheaper one.

The Mortgage Bankers Association of America reported in its Nov. 14 weekly survey that refinancing activity represented 78.4 percent of total mortgage loan applications, increasing from 74.9 percent the previous week. That was a new record for the refinance share. And it was the sixth consecutive week that the refinance sector was above 70 percent.

Causing the refinancing rush are low U.S. mortgage rates, which in the past weeks have fallen to the lowest level in at least 30 years.

While mortgage rates still are inspiring homeowners to refinance, the rates began edging up again last week.

In the most recent Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage averaged 6.51 percent for the week ending Nov. 16. That's up from 6.45 percent the week before. During the same period last year, a 30-year fixed-rate mortgage averaged 7.73 percent.

Most refinances involve 15-year fixed-rate mortgages.

The 15-year fixed-rate mortgage averaged 5.98 percent, up from last week's 5.94 percent. A year ago, the 15-year fixed-rate mortgage averaged 7.41 percent, according to the survey.

Surge in refinancing

Sidney Smith, owner of Corpus Christi-based American Appraisers, said he's seeing much of his work come from refinancing.

"We have a large number of refinances compared to what we would normally have," Smith said. American Appraisers has not stopped to actually count the amount of work coming from refinances as opposed to new mortgages.

But Smith said his business saw the refinancing craze begin a few months ago. And it hasn't slowed much since, he said.

Appraisers consider rare refinancing waves such as these nice perks. But they don't come along often enough to keep a business going.

"You don't get an opportunity to refinance unless there's a pretty dramatic reduction in the lending rate," Smith said. "You can go many, many years with very small fluctuations in the rate. Refinance is not the bread and butter."

Costs to consider

Homeowners have to find it worth their while to refinance. They have to consider all the fees, such as appraisals, lawyers and title insurance among other items. Those fees could easily run ,000 to ,000.

Most homeowners don't even consider refinancing unless there's a two-point spread between the homeowner's mortgage rate and the current rate, Smith said.

Smith said there's only so much time in a day. At his office, employees have been working overtime. A normal reappraisal takes eight hours for each home.

Appraisers take notes about the quality, condition and construction of a property. And they search the market for similar homes to the one being appraised and those that have recently sold. They make adjustments for any differences, and complete the appraisal.

Refinancing business is up 50 percent at American Bank, said Richard Scanio, chief lending officer.

"It's abnormally high," Scanio said. "What we're seeing is good for everybody - lower house payments, more disposable income and an opportunity to support the economy."

Shaving and saving

Last week, Dwayne Hargis, a local insurance agent, closed on a refinanced 15-year rate of 5.875. His old rate was 9 percent. Hargis thought about refinancing when rates were dropping a few years ago, but never got around to it. But this time, he couldn't ignore the low rates.

"We didn't make a move a couple of years ago," Hargis said. "I thought we'd better do it."

Hargis, 41, shaved off about a month on the mortgage of his south Corpus Christi home. But more significantly, he said, he's saving 0,000 in interest he would have paid under his old 30-year-mortgage.

"The goal was to get the house paid off before the kids went off to college," said Hargis, whose children ages are 6, 8 and 10. "I think it was a wise choice."

Jo-Anne Lamorey president of the Corpus Christi Association of Mortgage Brokers, said the refinance rush should end soon.

"I think a lot of people who are sitting on the fence are going to get off and do something and once that happens, there'll be a slowdown," she said.

Low rates remain

While rates are creeping back up, they should stay affordable for some time, say industry trackers.

"Speculation in the market that the Fed may not act as aggressively as investors had expected caused long-term mortgage rates to move up this week," said Frank Nothaft, Freddie Mac deputy chief economist. "But this slight bump up in rates is consistent with most economic forecasts and does not signal an end to current low mortgage rates."

The Federal Reserve has cut interest rates 10 times this year, but the decline in mortgage rates has more to do with bond yields. As investors snub stocks in favor of safer government bonds, it has pushed up bond prices and pushed down their yields. Lenders base mortgage rates on bond yields.

Paraskevas said he isn't in any hurry to see all the refinancing come to an end.

"I hope they're down another six months to a year," he said.

Related links:

1. Higher refi fees ahead
2. Remodeling the debt
3. Refinance boom piles up the paperwork