Sarah Prenzno was looking for a short-term solution to get equity out of her north Phoenix home.
Prenzno, a Peoria resident, opted to get a home equity agreement — which allowed her to consolidate her debt and improve her credit score without paying a monthly payment.
Instead, as her equity goes up, the more she will owe on the home equity agreement increases.
According to Realtor.com, the home equity agreement “allows you to borrow money against the equity” in your home. “Instead of paying the amount back monthly, you promise to pay back the loan and a percentage of the appreciation of the value of your home when you sell it,” the website stated.
Offering customers different products such as a home equity agreement or a home equity line of credit gives lenders flexibility to supplement their businesses while the housing market remains in the doldrums, said Lizy Hoeffer, a loan officer at Cross Country Mortgage in Phoenix.
Hoeffer’s office does about “one to two” home equity line of credit accounts per month.
“It’s a way to tap into equity,” Hoeffer said. “...We never used to do them.”
For Prenzno, a Valley Realtor, extra fees and raising her 3.75% interest rate was not in the cards. For a cash-out refinance, her fees would have been $15,000 and her mortgage payment would have increased by $1,000 per month.
She said she plans to sell her north Phoenix home in the next few months.
“It didn’t make sense to do a cash-out refi,” Prenzno said. “My (mortgage) rate would have gone up (about) 3%.”
As potential homebuyers continue to be faced with higher interest rates and a median home sales price of $451,000, according to Arizona Regional Multiple Listing Service data, many are looking for ways to access their equity without refinancing.
Refinancing would come with a rate on a 30-year fixed mortgage of 6.81% as of July 29, according to Tina Tamboer of the Cromford Report. Many people who refinanced in 2020 saw interest rates of 3.5%.
Higher summer temperatures and the fact a presidential election is approaching has cooled demand a bit for buying, Tamboer said.
“...(But) it could change very quickly,” Tamboer said.
On July 30 and July 31, the Federal Reserve’s Federal Open Market Committee is scheduled to meet and could signal the group is close to cutting interest rates, Tamboer said.
The Federal Reserve is “expected to signal this week that it will likely reduce borrowing costs as soon” as September, the Associated Press reported July 29.
Housing demand could pick back up as rates come down, according to Tamboer.
In the meantime, new homes in the Valley are getting built. New building permits are up by 75% from last year in the Phoenix market, according to Jim Daniel, president of RL Brown Housing Reports in Phoenix.
There were 9,418 new building permits from January to April in 2024 compared with 5,352 during the same time frame in 2023, Daniel said.
“We are really looking to see if rates go sub-6.5% and if we see a change in demand,” Tamboer said.
Realtors such as Prenzno say they need to price homes competitively for those homes to sell. Buyers have more choices and want the least amount of repairs when buying a home, she said.
But “there are buyers” in the market, she said.
“The best homes are selling the quickest,” Prenzno said.
Homebuyers need to be on their toes, according to Tamboer.
“Buyers who are ready need to keep a strong eye on rates,” Tamboer said.
It’s important for lenders such as Hoeffer to keep an eye on economic trends. Hoeffer said she doesn’t have to supplement her business with other products, but she spends “several hours” per week watching how the economy is going as interest rates “typically” follow economic trends, she said.
“Less business doesn’t mean we are out of business,” Hoeffer said.
A potential rate cut by the Fed should save homebuyers more on their monthly payment than a seller simply deciding to decrease their price a bit, Tamboer said.
Hoeffer agrees.
“(If you are paying cash), you are more subject to bidding wars.”
Brent Ruffner Lead News Reporter | Daily Independent
Journalism has fascinated Brent Ruffner since junior high school.
Since 2001, his stories have been published in newspapers from the Albuquerque to the Arizona and he has always had a knack for making sure his facts are right and his words are to the point.
Growing up, Brent watched as sports reporters covered his beloved Phoenix Suns, a team he followed since Charles Barkley first arrived in Phoenix via trade in 1992. Sports reporting was a dream back then.
But after gaining some writing experience, Brent found a love for news instead of covering different types of sports. In 2008, he moved to New Mexico and covered crime, schools and city beats all while holding elected officials accountable.
He covered stories that ranged from a DEA drug bust gone bad to an award-winning story on school lunches.
In Arizona, Brent was a freelance writer who covered everything from the importance of citrus in the state to Esteban owning a store in downtown Prescott.
Brent is a 2007 graduate of the Walter Cronkite School of Journalism and Mass Communication at Arizona State University.
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