Mortgage holders’ equity levels have continued to rise, the latest report from the Intercontinental Exchange Inc. (ICE) revealed.
Rising home prices are driving increased mortgage holder equity, which reached an all-time high of $17.6T in the second quarter of 2024, the August 2024 ICE Mortgage Monitor Report indicated. At the same time, outstanding mortgage debt reached its own record high of $13.8T in June.
ICE's report is congruent with other industry data. Just last week, ATTOM reported that 49.2% of mortgaged residential properties in the United States were considered equity-rich in the second quarter.
“Outstanding mortgage debt, including both first and second liens, hit an all-time high in June, but growth in home prices has outpaced that gradual rise in debt,” ICE Vice President of Research and Analysis Andy Walden pointed out. “Total cumulative debt leverage – essentially a loan-to-value ratio for the entire mortgage market – is equivalent to 44.1% of underlying home values, the third lowest leverage ratio we’ve seen in the past 20-plus years. Rising home prices have also continued to build the fortunes of existing homeowners, pushing tappable equity – the amount a mortgage holder can leverage while retaining a healthy 20% equity cushion – to its highest level ever.”
There is now more outstanding mortgage debt than at any point in history. At the same time, overall market leverage remains near all-time lows.
Tappable equity also hit a new peak in June at $11.5T. This is a 4% gain from Q1 2024 and +9.2% year-over-year.
Among mortgage holders with tappable equity, 32 million have $100,000 or more, 4.6 million have at least $500,000, and nearly 1.2 million have $1 million or more, with higher equity holders tending to have lower first lien rates.
Two-thirds of that tappable equity belongs to borrowers with 760-plus credit scores. A similar share is held by those with sub-4% first lien rates.
Less than 325,000 homeowners are underwater nationwide, representing a little over half a percentage point of active mortgages, with another 4.2% having less than 10% equity in their homes.
ICE’s report also indicated that the number of borrowers in negative equity positions may increase in states like Texas, Florida, and Louisiana, where growing inventory is expected to soften home prices.
“Home equity lending has been sluggish since interest rates began their climb higher early in 2022,” Walden said. “As the Fed raised short-term lending rates, accessing equity became more expensive for homeowners, evidenced by the anemic growth in such lending despite record levels of available, tappable equity."
