This $63B in home equity withdrawals is the highest withdrawal rate in 15 years.
Home Borrowers Withdrew $63B in Equity in Q2 2021
According to the latest data from Black Knight, home borrowers withdrew the most home equity, a whopping $63B, in nearly 15 years during Q2 2021.
The remainder in tappable home equity is $9T, an increase of +37% y/y.
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Where Did All That Home Equity Go in Q2 2021?
According to National Public Radio’s MarketPlace, homeowners spent +3% more on home improvements than ever!
Soaring Home Prices Spiked Home Equity Resources
Home prices have skyrocketed so high in most places throughout the country that average homeowners could refinance their mortgages at lower interest rates, withdraw $173,000 from their home equity and still retain a good 20% equity in their houses.
The amount of such tappable home equity in Q2 2021 increased an average of $20,000 from Q1 2021.
Homeowners’ Equity Provides Buffer to Owners Exiting Forbearance
Ben Graboske, president of data and analytics with Black Knight, said that 98% of homeowners still in forbearance as of mid-August would have at least 10% in home equity.
During the last downturn during 2008-2010, homeowners had no such home equity “safe zone” or buffer…rather than 98% of homeowners having at least 10% in equity, 28% of homeowners were completely underwater.
Graboske said, “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 (mortgage) modifications.”
State of Mortgage Market
During Q2 2021, mortgage originations dropped -5% compared to Q1 2021 yet it was the fourth straight quarter in which there was more than $1T in total lending. More than 2.2M people chose to refinance their homes.
The national delinquency rate fell from 5% to 4,4% in July despite 1.45M borrowers being 90+ days past due on their mortgage payments.
Forbearance Continued On Downward Path
Just 1.75M homeowners remained in forbearance, 3.3% of mortgage-holders in forbearance, as of mid-August compared with 5.9% in mid-July. Federal Housing Administration (FHA) and Veterans’ Affairs (VA) loans represented 40% of all forbearance plans.
Only 1.9% of all Freddie Mac and Fannie Mae-backed loans remained in forbearance.
More than 50% of borrowers who exited forbearance in April and May 2020 repaid the entirety of their mortgages, likely due to low interest rates encouraging those borrowers to refinance.
Foreclosure Likely Below Normal Levels Through 2021
Just remember that foreclosure starts were more than three times higher in pre-pandemic August 2019 than they were in August 2021.
Though there are still some 1.6M borrowers in forbearance programs, the future for those remaining in COVID bailout programs is better than originally thought. According to Rick Sharga, executive vice president with RealtyTrac, an ATTOM Data Solutions that lists for-sale foreclosed properties, “…it’s likely that foreclosures will remain below normal levels at least through the end of the year.”
Thanks to HousingWire, National Public Radio’s MarketPlace, and CNBC.