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Old 06-09-2022, 07:00 AM
 
17,339 posts, read 22,081,380 times
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Quote:
Originally Posted by Fedupwiththis View Post
Anyone else get the feeling that massive amounts of cashout refis are what's holding this economic house of cards together? With the crazy low rates we saw the last 2 years and all these people refinancing as their house prices went up is it crazy to think people started treating the house like a piggy bank to pull out an extra $50k and that's what they've been really living off to offset inflation costs or why so many people decided to drop out of the workforce?

How long before that money dries up and people find themselves in situations they can't afford?
50K isn't exactly living large.

A buddy's dad is thinking of doing one. House is free and clear, worth 750K+ and he wants 100K mtg so he can replace the roof, windows and then buy a new truck (30K max). He has about a 4K month income from SS/Pensions.

My buddy says: Sell the house, take the cash and buy a condo. Guy is 83, I can't see that happening.


I've never done a cash out refinance. I would only refinance my balance at a lower rate/term. I like to leave the closing with all the money, not payoff another bank loan.
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Old 06-09-2022, 07:44 AM
 
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,585 posts, read 81,260,275 times
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Quote:
Originally Posted by GoAmericaGo View Post
Could be — people that bought a house say 2 years ago might have $150k in extra equity now so they borrow against it. Some of those loans might be variable rate too so the payment keeps rising. If prices of everything keep rising I would think that money will be buying less and less.
More than that in some places. Our new neighbors across the street paid $800k in early 2021, now worth $1,415,070.00, that's an increase of over $615,000 in just over a year.

I was just looking at ours value, just before the pandemic in late 2019, and it was $900k. Today it's $1.6 million, that's almost double in 3 years. We have not done a refi, planning to move next year and use the equity to pay cash in a less expensive area, but we have noticed that many of our neighbors have had a steady stream of contractors doing additions, remodels, extensive landscaping, painting and driveway resurfacing. I don't know where they are getting their money for all that, but it could be cashout refis.
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Old 06-09-2022, 10:31 AM
 
Location: Sunny So. Cal.
4,397 posts, read 1,704,176 times
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Quote:
Originally Posted by Fedupwiththis View Post
Yes I did. The difference is I reinvest that money to earn a higher rate of return then it’s actually costing me so that money doesn’t run out it grows vs the average person who uses it to buy their new $60k Ford bronco, or have a pool installed, or stop working. Huge difference.
Is that what the average person does? LOL
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Old 06-09-2022, 01:05 PM
 
Location: Lake Norman, NC
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Quote:
Originally Posted by stone26 View Post
Is that what the average person does? LOL
Maybe they used the cash-out to repay their student loans?
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Old 06-09-2022, 02:37 PM
 
Location: Taos NM
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Well, the bottom 50% is in better shape than they have been in a while: https://www.bloomberg.com/news/featu...emic#xj4y7vzkg.

Could refi's be a bubble, it's possible. However, it's likely that people who have the ability to refi and cash are likely in better shape financially than the lower incomes who are more likely to literally be running paycheck to credit card payment.

I think house of cards crashing down is the wrong analogy for this. It's much more likely that we'd have an slow economic drag from people inefficiently using artificially inflated home prices for non appreciating purchases, then being forced to pay back debt on stagnating values. Hemlocks neighbors will probably be in for a rude awakening when they sell their house and they only recoup 55% of the upgrade expenses they stuck into it. I don't your typical refi-er would go bankrupt though.

Bottom line Americans should have been like the Chinese and just stacked away money during the pandemic instead of paying premiums during a supply and labor crunched period because they had excess money and it was burning a hole in their pockets. I think we all could use 5-15% re-education from Chinese elders.
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Old 06-09-2022, 07:18 PM
 
Location: Tampa, FL
388 posts, read 536,304 times
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Quote:
Originally Posted by GoAmericaGo View Post
Could be — people that bought a house say 2 years ago might have $150k in extra equity now so they borrow against it. Some of those loans might be variable rate too so the payment keeps rising. If prices of everything keep rising I would think that money will be buying less and less.
The market share of ARM's was below 4% when rates were at a all time low (including those 2 years ago).
Only now, as rates have increased significantly, are more people turning towards them.



Quote:
Originally Posted by Fedupwiththis View Post
Yes I did. The difference is I reinvest that money to earn a higher rate of return then it’s actually costing me so that money doesn’t run out it grows vs the average person who uses it to buy their new $60k Ford bronco, or have a pool installed, or stop working. Huge difference.
Do you have any data to back up what you think the "average person" spends their cash out on?
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Old 06-09-2022, 10:55 PM
 
Location: Sunny So. Cal.
4,397 posts, read 1,704,176 times
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Quote:
Originally Posted by Stripes17 View Post
Maybe they used the cash-out to repay their student loans?
If they had private loans, it could be the case. But I think it would still be foolish, since they are now using their house as collateral.
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Old 06-10-2022, 07:37 AM
 
2,170 posts, read 1,956,918 times
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Quote:
Originally Posted by TampaBull13 View Post


Do you have any data to back up what you think the "average person" spends their cash out on?

No, that's why I ended the headline in a question mark. Could people have pulled money from their homes, and now they have a nice fat checking account so they're going out and spending but as soon as that money runs out that'll be when the crash really accelerates. Inflation is just going to make it happen faster.

Consumer credit card debt is at an all time high and subprime auto loan defaults also hit an all time high. I'd say the writing is on the wall.

The average person is pretty terrible with money and investing, everyone wants instant gratification.
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Old 06-10-2022, 09:41 AM
 
5,342 posts, read 14,145,851 times
Reputation: 4700
Quote:
Originally Posted by Fedupwiththis View Post
Anyone else get the feeling that massive amounts of cashout refis are what's holding this economic house of cards together? With the crazy low rates we saw the last 2 years and all these people refinancing as their house prices went up is it crazy to think people started treating the house like a piggy bank to pull out an extra $50k and that's what they've been really living off to offset inflation costs or why so many people decided to drop out of the workforce?

How long before that money dries up and people find themselves in situations they can't afford?
Nope. Don’t get that feeling at all. The vast majority of people that do a cash out refi use the proceeds for home improvements or to roll a 1st and a 2nd mortgage into one new low long term fixed rate thereby improving their long term financial picture.
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Old 06-10-2022, 09:59 AM
 
5,342 posts, read 14,145,851 times
Reputation: 4700
Quote:
Originally Posted by Fedupwiththis View Post
Yes I did. The difference is I reinvest that money to earn a higher rate of return then it’s actually costing me so that money doesn’t run out it grows vs the average person who uses it to buy their new $60k Ford bronco, or have a pool installed, or stop working. Huge difference.
Oh you are so special. Only you do it right and everyone else does it wrong. What a tool.
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