Approximately 44M homeowners with mortgages can now access cash via their home equity or HELOCs. How much cash? $6T…+21% more cash equity than there was pre-crisis in 2006 and nearly 3X as much cash equity as there was at the bottom of the housing market in 2012. On average, this $6T translates into $138,000/person.
Homeowners with mortgages withdrew $65B in home equity in Q2 2018, just 1.13% of tap-able equity. This is the lowest share of tapped home equity since 2014.
Experts think there are two factors holding homeowners back from tapping into their available home equity cash. The first factor may have to do with having long memories…memories of the housing crisis when their parents, friends and neighbors used their home equity like ATMs and people lost their homes. Perhaps their own families lost their homes.
The other factor holding homeowners back from tapping into their home equity cash may be higher interest rates. Ben Graboske, executive vice president of Black Knight Data Analytics (the firm from whom we’re referencing for data here) said, “At this point last year, homeowners were tapping into +17% more of available equity than today which suggests that if (interest) rates on cash-out refinances and HELOCs had held steady to last year’s rates, we’d see another $13B more equity being accessed today.”
Even though homeowners are being cautious with their home equity cash this year, experts anticipate homeowners will be less frugal with that equity cash next year. Why? September’s preliminary report from the University of Michigan’s Consumer Confidence Index jumped to 100.8 from August’s 96.2, the second highest level since March of this year and the second strongest level since 2004. The Index report credited increased stock holdings and rising home values for this leap in consumer confidence.
Harvard University’s Center for Housing Studies indicated that home remodeling/renovating projects would consume whatever home equity cash is spent during the remainder of 2018 and all of 2019. The Center anticipates Kansas City, Charlotte, San Antonio, Dallas and Sacramento to lead the pack of 41 of 50 metro markets in equity spending on home improvement projects.
Also, with ever increasing home prices, more people are staying in their existing homes simply because they can’t afford to move. The result? More people are turning and will turn their existing homes into their move-up homes by renovating them.
