In 2021, It’s Still a Good Time to Refinance a Mortgage in the Bay Area

Is it still a good time to refinance a mortgage loan in the San Francisco Bay Area, in early 2021?

In a word, yes. Many homeowners across the Bay Area could still benefit by refinancing their homes at a lower interest rate. Mortgage rates are incredibly low right now, and rising house prices have given many homeowners in the region a higher level of equity.

A Good Time to Refinance in the Bay Area

You’ve probably heard all of this before. Over the past few months, there have been so many news stories about “record-low mortgage rates” and “a great time to refinance” that we tend not to notice them anymore. It starts to sound like a marketing pitch after a while.

But it’s also true.

Mortgage rates fell steadily throughout most of last year, smashing one record after another. During the first week of January 2021, the average rate for a 30-year fixed home loan dropped to an all-time low of 2.65%. That had never happened before, not in 50 years of record keeping.

And while rates have ticked up a bit since then, they are still incredibly low by historical standards. That’s one of the reasons why early 2021 is a good time to refinance a home in the San Francisco Bay Area.

If the interest rate on your current mortgage loan is in the upper-3% range or higher, a refinance loan might save you a substantial amount of money over the long term. The only way to find out is to run the numbers, and we can help you with that.

Of course, we don’t know how long these conditions will last. The average rate for a 30-year fixed mortgage rose a bit, after setting that record low last month. And while they’re expected to remain relatively low in 2021, interest rate could inch upward over the coming months. That would reduce the benefits of refinancing for some Bay Area homeowners.

Related: Why it’s a good time to sell a home

California Refinancing ‘Rush’ Expected to Slow in 2021

In 2020, mortgage refinancing activity in California and elsewhere across the nation swelled to a record level. This is largely the result of those record-low mortgage rates mentioned above.

Homeowners across the Golden State rushed to take advantage of money-saving conditions, leading to one of the biggest refinancing years in history. It was a banner year.

But we might see a slowdown in refinancing volume later this year:

• According to a recent report from the research team at Freddie Mac, total mortgage refinance originations are projected to be nearly $2.6 trillion for 2020.
• Looking forward, they expect to see a slowdown in home refinancing activity in 2021. Refinancing volume is predicted to drop to $1.8 trillion in 2021 and $895 billion in 2022.

The bottom line here is that 2021 will still be a good time to refinance an existing home loan, for many in the Bay Area. But the refi “boom” that started last year will likely taper off over the coming months, especially if rates continue to creep upward.

In January Freddie Mac’s chief economist Sam Khater wrote:

“Entering 2021, we anticipate a modest rise in rates that will likely affect refinance originations, which are coming off a remarkable year. We therefore forecast total originations to decline slightly to $3.3 trillion but remain strong this year.”

Home Prices in the Region Rose Steadily Last Year

We’ve covered the mortgage rate side of things. They are still hovering at historically low levels.

But there’s another reason why 2021 could be a good time to refinance in the San Francisco Bay Area. Home prices have risen significantly over the past year, giving homeowners more equity to work with.

According to the California Association of Realtors, the statewide median home price rose to an all-time record high of $717,930 in December of last year. Prices within the nine-county Bay Area region were up by 16.4% in December 2020, compared to a year earlier.

Related: Will house values go down in 2021?

Taking Advantage of Favorable Conditions

As a result of these trends, most homeowners in the area have more equity now than they did one or two years ago. That makes it easier for them to benefit from refinancing. So chalk up one more reason why 2021 is a good time to refinance in the Bay Area.

But the future is uncertain, especially where mortgage rates are concerned. They are notoriously difficult to predict over the long term. Some forecasters have predicted that 30-year fixed mortgage rates will hover close to 3% for much of 2021 — but that doesn’t make it certain.

The bottom line here is that refinance activity is expected to taper off later in 2021, due to a slight increase in borrowing costs. But the conditions are still favorable. So, if you’re a homeowner in the Bay Area, you owe it to yourself to at least explore your refinancing options.

Getting started: If you have questions about a refinance loan, or if you’d like to know how you might benefit from it, please contact our staff. We can review your current mortgage situation and other factors to determine if now is a good time for you to refinance.