A lot of people who have owned houses in Reno and Sparks for a while are tapping into the increased values of their residences, refinancing mortgages and taking out cash for home improvements and other projects.
In fact, northern Nevada saw one of the strongest surges of mortgage refinancing of any metropolitan area in the nation late last year.
At the same time, however, the number of new mortgage loans written to pay for home purchases declined sharply in the Reno-Sparks region.
ATTOM Data Solutions, a Southern California company that tracks real estate data, says the number of mortgage-refinancing transactions in the Reno area during the fourth quarter of last year rose by 55% over third-quarter levels.
That’s the second-largest increase in the nation, trailing only Sioux Falls, South Dakota, which saw a 75% increase. Nationally, ATTOM says the number of refinances grew by 11.5% during the fourth quarter.
James Anderson, executive vice president of Greater Nevada Mortgage, says the upsurge in refinancing is no surprise.
On the one hand, the dramatic increase in home values has created a lot more equity for homeowners. The median price of an existing single-family home in the region in February — $450,000 — was 14.6% higher than a year earlier, according to the Reno/Sparks Association of Realtors.
That creates a larger spread — the homeowners’ equity — between the potential sales price and the amount still owed on a mortgage.
At the same time, mortgage interest rates have remained at very low levels, about 3.5% in recent days for a 30-year, fixed-rate loan.
With that combination of higher values and low rates, Anderson says it makes sense for people with a mortgage to refinance, either to convert some of that newfound equity into cash or to lower the monthly house payment.
“During 2020, many homeowners were utilizing this option for projects like home renovations,” Anderson says.
But while refinancings boomed, mortgage lenders in the region saw a slowdown in loans for home purchases. ATTOM says the number of home-purchase mortgages in the Reno area fell by more than half during the fourth quarter compared to last autumn’s levels.
Anderson explains that’s a reflection of the challenges that face the residential market in Reno and across the nation.
The inventory of homes available for sale has fallen dramatically during the pandemic. Among other things, Anderson notes that potential sellers didn’t want strangers tromping through the house during a pandemic.
At the same time, he notes that homebuilders in the region can’t build new homes fast enough to keep up with demand.
“Simply put, the inventory of homes available for purchase just isn’t there for the amount of people looking to buy,” he says.
