Although home prices have been slow to grow, tappable equity surpassed $6 trillion for the first time in history in Q2 2018, according to the latest Mortgage Monitor report from Black Knight. Black Knight notes that there is now three times as much equity as at the market’s bottom in 2012, and 21 percent more than at its pre-crisis peak in 2006. Now, around 44 million homeowners can tap into their equity via cash-out refis or HELOCs, the report indicated.
Still, rate of growth in equity in Q2 is slightly slower than the first quarter of 2018. Home equity grew by $256 billion in Q2, compared to $380 billion in Q1.
“As the second quarter came to a close, the total amount of tappable equity available to homeowners with mortgages surpassed the $6 trillion mark for the first time in history,” said Ben Graboske, EVP of Black Knight’s Data & Analytics division. “There is now $636 billion more tappable equity available than at the start of 2018, and nearly three times as much compared to the bottom of the market in 2012.
According to the report, rising interest rates may negatively impact homeowners' ability to tap into their equity. From Q1 to Q2 2018, the average interest rate on 30-year mortgages increased by more than 0.25 percent, not keeping pace with the average HELOC rate, which increased by 0.30 percent.
Graboske also notes how slowing price appreciation has impacted equity.
“After the strongest Q1 rise in home prices in five years, momentum shifted in the second quarter,” said Graboske. “Q2’s 2.7 percent gain in home prices was the lowest second-quarter gain in five years. This is made all the more notable by the fact that Q2 has historically been the strongest quarter for home price gains. Drilling down to a more localized geographic level, we see a significant pullback in the rate of home price appreciation in the nation's 10 most equity-rich markets. This, in turn, pushed down overall equity growth nationwide.”
Find the complete Black Knight Mortgage Market Report here.