Steamboat Springs National home mortgage applications fell to a 15-year low this week in spite of the fact that mortgage interest rates are at unprecedented lows. At least on a national basis, the math works well for refinancing.
But that’s not what is happening in Steamboat Springs.
Freddie Mac reported last week that the average rate on all outstanding mortgages is 5.3 percent. The new 15-year fixed mortgage rates of 3.36 percent leave ample room for a typical 30-year mortgage holder to refinance and move down to a 15-year horizon that will save many thousands of dollars during the life of the loan.
The Associated Press reports that the share of mortgage applications intended for refinancing rose this week to nearly 80 percent of the market, up from 70 percent just three weeks ago.
Kathryn Pedersen, who heads the mortgage lending department at Yampa Valley Bank in Steamboat Springs, said the opposite has been true in her office.
“More and more we deal with purchasers,” Pedersen said. “We had a refinancing boom that began in late 2009 and carried into 2010. In 2011, more than 80 percent of our business has been purchases. That refi boom was huge — we had people calling continuously all day.”
She theorizes that a large segment of Routt County homeowners who stood to either reduce the amount of their monthly payments or move to a shorter amortization already did so last year.
David High, of Alpine Bank in Steamboat Springs, said declining real estate values and the shrinking equity of homeowners as a result poses a challenge for people who want to refinance, but they are managing to do so anyway.
“We’re finding that 40 percent of people refinancing are coming to the closing table with cash” to make up the difference between a current appraisal and what their home was previously worth, High said.
That’s a big difference from the days when homeowners here could use a refi to pull money out of their home to pay for college tuition for their children.
The published interest rate on a 30-year fixed mortgage fell last week from 4.32 percent to 4.15 percent, according to the AP. That’s the lowest rate in 40 years. To find lower long-term rates, it’s necessary to go back to the 1950s, when long-term loans maxed out at 20 or 25 years.
Pedersen said several factors are keeping the Steamboat market from benefitting from record low mortgage rates.
The first is that it’s difficult for existing property owners to sell their homes and get into something newer.
“We don’t have a move-up buyer,” Pedersen said.
Public perception encompasses other factors holding Routt County back, she said.
“People are still worried that things are going to go down more,” she said. And in the case of refinancing, “Many people believe the loan process is just too hard.”
What they don’t realize she said, is that banks that process increasingly detailed paperwork take the burden of the loan application process off the borrower.
There’s no reason borrowers in Routt County shouldn’t be able to tap into the lowest available rates, High said. However, he cautioned that confusion can arise from the fact that most news stories lag the actual market.
Record low interest rates aren’t anticipated to stimulate the national housing market, and there’s a slightly different twist on that angle in Steamboat, where vacation condominiums are a big part of the real estate market.
“It’s so hard to get a standard 30-year fixed mortgage on a condo right now,” High said.
His bank and competitor Wells Fargo have created portfolio loans (pots of money dedicated to unconventional condo loans) intended to fit market niches, High said. For example, Alpine Bank has portfolio loans for purchasers interested in the relatively large inventory of live/work condos in Steamboat. It has another portfolio for condominium hotels.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com