Collectively, mortgage holders’ tappable equity hit $11T in Q1 2022.
Tappable Equity Gains in Q1 2022 Increased $1.2T
The amount of money mortgage holders could access from their homes while retaining the required 20% equity cushion hit the unprecedented amount of $1.2T during Q1 2022, according to Black Knight. This $1.2T increase in equity gains is the largest quarterly increase since this mortgage software and analytics firm began tracking equity data in 2005.
Two years of accelerating home prices pushed total, collective tappable equity to $11T in Q1 2022, twice the previous peak of tappable equity in 2006.
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The average amount of tappable equity individual mortgage holders now have is $207,000.
Black Knight indicated that tappable equity is held by nearly 75% of high-credit borrowers have interest rates below 4%. Comparatively, the current rate on the popular 30-year fixed-rate mortgage is over 5%.
Prospective Buyers Now Likely to Be Priced Out of Market
The more mortgage interest rates increase, the more prospective homebuyers are being priced out of the market.
Ben Graboske, president of Black Knight Data & Analytics, said, “It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years.”
Graboske added, “Depending upon where you stand (and what mortgage interest rate you have), this could be the best or worst of all possible markets.”
Housing Market Showing Signs of Cooling
With home prices, as measured by Black Knight, increasing +19.9% y/y in April, prices were down slightly from the +20.4% y/y increase in March.
According to Graboske, “April’s decline (in home prices) is more likely a sign of deceleration caused by the modest (interest) rate increases in late 2021 and early 2022 when rates first began ticking upwards. The March and April 2022 rate spikes will take time to show up in repeat sales indexes.”
Supply Remains Excessively Low
All market indicators imply that housing supply remains “pitifully low in the current market,” according to CNBC.
Active listings, though beginning to move upwards, were -67% below pre-pandemic levels with some -820,000 fewer listings compared to typical spring selling seasons.
Home Equity Being Tapped for Renovations, Not Home Sales
Due to continued scant inventory and rising interest rates, most homeowners are more likely to tap their home equity in order to renovate their current homes.
Harvard’s Joint Center for Housing projects that home improvement spending is likely to increase approximately +14% in 2022. Sophia Wedeen, a researcher in the Remodeling Futures Program at the Center, said, “Record-breaking home price appreciation, solid home sales and high incomes are all contributing to stronger remodeling activity in our nation’s major metros, especially in the South and West.”
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Thanks to CNBC.
