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- Driven by the red-hot housing market, tappable equity surged nearly 40% from last year.
- Fewer than 3% of mortgage holders have less than 10% equity, the lowest share ever observed.
- The average homeowner now has $173,000 in tappable equity, $20,000 more than in 1Q.
The amount of equity available for homeowners with mortgages to borrow against while still retaining at least 20% equity in their homes spiked dramatically in the second quarter of 2021 to a total of $9.1 trillion, according to a new report.
Black Knight Inc.’s Data & Analytics division said today that its latest Mortgage Monitor Report found that U.S. homeowners’ “tappable equity” surged 37% in the second quarter from the same quarter last year.
Ben Graboske, president of Black Knight Data & Analytics, called the increase “astonishing” and said the spike was driven by gains in home values over the quarter.
“According to our Black Knight HPI, as of the end of June, home values had risen nearly 20% from the year before and 7.4% in Q2 alone,” he said. “As a result, already at a record high of $8.1 trillion at the end of Q1, U.S. homeowners with mortgages gained another $1 trillion in tappable equity in the second quarter alone. This is by far the strongest growth we've ever seen.”
He added that the average mortgage holder now has approximately $173,000 in equity available, a $20,000 increase in just three months.
The dramatic increase should especially help struggling homeowners, he said.
“A rising tide lifts all boats as they say, including homeowners in forbearance -- whose ability to return to making payments when forbearance ends will likely be a key driver in the nation's overall COVID-19 economic recovery.”
Graboske said that approximately 98% of homeowners in forbearance now have at least 10% equity in their homes.
“Even when we add in 18 months of forborne payments — including principal, interest, taxes, and insurance — the share with less than 10% equity only climbs to 7%, about 135,000 homeowners,” he said. “This is a drastically different dynamic than during the worst of the Great Recession, when more than 40% of all mortgage holders had less than 10% equity and 28% were fully underwater.”
He added that such strong equity positions should “help limit the volume of distressed inflow into the real estate market, as well as provide strong incentive for homeowners to return to making mortgage payments — even if needing to be reduced through modification.”
The report also found signs that homeowners may be less hesitant to tap into their equity. While mortgage originations fell by 5% from the first quarter, the second quarter was the fourth consecutive quarter with over $1 trillion in originations, and the fifth consecutive quarter with at least 2.2 million refinances, including 1.1 million cash-out refinances, the largest such quarterly volume in nearly 15 years.