Homeowner Equity Tops All-Time High
Sep 25th, 2018 @ 9:04 PM by Amber Nelson
U.S. homeowners collectively experienced a historic milestone in the 2018 second quarter – total ‘tappable’ home equity grew to a record high, according to Black Knight Inc.
Black Knight’s Mortgage Monitor Report found that U.S. tappable equity jumped up to $6 trillion, a gain of $636 billion since the beginning of 2018 and triple the amount of equity in the market at the bottom in 2012. Tappable equity is defined as ‘the amount of equity available to homeowners with mortgages to borrow against before hitting a maximum 80 percent combined loan-to-value ratio.’
“Despite the noticeable slowing in home price appreciation over the past four months that Black Knight has reported on recently, some 44 million homeowners now have equity that could be tapped via cash-out refinances or home equity lines of credit (HELOCs),” said Ben Graboske, executive vice president of Black Knight’s Data & Analytics division.
During the second quarter, 1.13% of total tappable equity was pulled out for HELOCs and cash-out refis, an increase of $65 billion from the first quarter but down 3% from the year before. It was also the lowest percentage of equity utilized in over four years. Black Knight believes that homeowners are less likely to make use of their equity because of rising interest rates on both 30-year mortgages and HELOCs.
Black Knight also noticed a slowing in equity growth even as it hit a record high. “After the strongest Q1 rise in home prices in five years, momentum shifted in the second quarter,” Graboske said. “Q2’s 2.7 percent gain in home prices was the lowest second quarter gain in five years.” That decline was most notable in California where home price gains were actually down by 43% from the first quarter, with the priciest areas falling as much as 80%. Since California markets are often a predictor of national trends, home price growth may be slowing down across the country.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.