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Tappable home equity hits $6 trillion in Q2

Tappable home equity surpassed the $6 trillion mark for the first time in history in the second quarter of 2018, but the days of dizzying growth in home equity could be numbered, according to Black Knight.

Tappable equity rose by $256 billion in the April-June period, to $6.06 trillion, and now stands at three times more than during the bottom of the market in 2012. The second quarter saw the fourth-biggest quarterly gain in equity since the recovery, but the pace slowed from a strong first quarter and in step with cooling home prices, the company said.

Helocequity“Although total available equity broke an all-time record, we observed strong and unseasonable quarterly slowing in equity growth,” said Ben Graboske, Black Knight’s executive vice president. “While Q2’s $256 billion increase in tappable equity was the fourth-strongest quarterly growth since the housing recovery began, the decline from Q1’s $381 billion was significant, particularly given that, historically, Q1 and Q2 are responsible for the bulk of equity growth in any given year.”

Home-equity trends go the way of home prices. Home prices appreciated at 2.7 percent in the second quarter, the slowest pace for a second quarter in five years, according to Black Knight. Prices have cooled off significantly in areas of the country that have previously seen a steep run-up and corresponding equity surge. In California, for example, several high-priced metros saw a noticeable slowing in home-price growth in the second quarter.

Also, homeowners still appear reluctant to tap their equity, even though more than 44 million Americans have equity to tap, Black Knight said. The company defines tappable equity as the home value minus the mortgaged amount and a 20 percent downpayment. 

Black Knight estimated that $65 billion in equity was withdrawn through cash-out refinances or home equity lines of credit (HELOCs) this past second quarter, down more than 3 percent in the second quarter of last year. The $65 billion withdrawn represented just 1.13 percent of what was available to be tapped, a four-year low in overall equity use.

Black Knight said that higher mortgage rates have likely discouraged people from drawing on HELOCs or taking out cash-out refinances and home-equity loans. Higher rates resulted in homeowners tapping $13 billion less equity in the quarter than they would have otherwise, the company estimated. 


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