Tappable equity hits another record high in third quarter

Home-price appreciation has pushed the collective tappable equity of U.S. homeowners to another record high during the third quarter of this year, according to the latest Mortgage Monitor Report from Black Knight.

Despite the rate of appreciation slowing in recent months, the aggregate total of tappable equity — the amount available for a mortgage borrower to access while retaining at least 20% equity in their home — grew to $9.4 trillion in third-quarter 2021. The increase of $2.3 trillion over the past year equates to an annual growth rate of 32%, a pace deemed “astonishing” by Ben Graboske, Black Knight’s data and analytics president.

This surge brought tappable equity to a level almost 90% higher than its pre-recession peak in 2006, a gain even more amazing when considering that home-price growth in the third quarter of this year was less than half the rate recorded in the prior quarter.

“As prices have surged over the past 18 months, the average mortgage holder’s equity stake has risen by $53,000,” Graboske said. “That works out to nearly $178,000 available in tappable equity to the average homeowner with a mortgage before hitting a maximum combined loan-to-value ratio of 80%.”

Homeowners are increasingly taking advantage of this soaring equity. They tapped into it during the third quarter at the highest rate in more than 14 years, pushing cash-out loans to a 54% share of all refinances in Q3.

“Data points like these inevitably and understandably lead to comparisons with the run-up to the Great Recession,” Graboske noted. “It’s therefore particularly important to note that the $70 billion extracted from the market via cash-out refis in Q3 2021 represents just 0.8% of the available tappable equity at the start of the quarter.

“For context, that’s less than a third of the rate at which people were pulling cash out of their homes at the peak of such activity in 2005. Underwriting standards are much higher today as well, with the average credit scores of cash-out refinance borrowers more than 50 points higher than during that period, and the resulting LTVs are much lower.”

In fact, Graboske said, the average borrower’s mortgage debt during the third quarter was only 45.2% of their home’s value. That’s the lowest level of leverage that Black Knight has ever recorded, he explained, going back at least to the turn of the 21st century.

“In short,” Graboske continued, “it’s a markedly different time and market today.”


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