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Why is U.S. Home Equity Declining?

Black Knight’s Mortgage Monitor Report revealed that total equity on mortgaged properties now stands at $9.8 trillion, $5.9 trillion of which is tappable.

According to the report, a total of 43.6 million homeowners have tappable equity available, approximately 272,000 fewer than in Q2 2018. Average homeowners with a minimum of 20 percent equity in their home have $136,000 in tappable equity— a decline of  $2,300 from the last quarter.

The report pointed out the drop of tappable equity in 60 of the nation’s 100 largest markets in Q3 2018. It attributes this fall to the softening home prices in some of the most expensive areas. Nearly 75 percent of the total decline in tappable equity was recorded in California alone. These trends are reflective of a tightening market and rising interest rates, the report indicated.

Ben Graboske, EVP of Black Knight’s Data & Analytics division, said, “After seeing a significant slowdown in its growth from the first to second quarters of 2018, the amount of tappable equity fell by $140 billion in Q3 2018.” He also stated that this is the first decline experienced since the beginning of the housing recovery.

“Three markets in California alone – San Jose, San Francisco, and Los Angeles – accounted for 55 percent of the total net decline. Add Seattle into the mix, and you see that just four markets were behind two-thirds of the net reduction in tappable equity,” Graboske said.

Graboske also pointed out that affordability “affordability concerns are beginning to have an impact on home prices, particularly in more expensive markets, and as a result, on homeowner equity as well.”

For-sale Inventory reflected an annual increase in four years. Listings on mortgaged properties revealed homeowners’ reluctance to put their current homes on the market due to ‘rate lock’ or ‘affordability lock’, holding down available inventory by about six percent.

Just 1.8 percent of owing more on their mortgages compared to their homes worth, according to the quarterly equity data. The average amount available to borrow against is $136,000 among those with tappable equity. Over 50 million homeowners with mortgages have some amount of equity wherein 43.6 million of which have tappable equity,  a decline of approximately 272,000 compared to last year.

Total U.S. loan delinquency rate is at 3.64 percent with a month-over-month change in delinquency rate at -8.19 percent. Mississippi, Louisiana, Alabama, Arkansas, and Tennessee topped the list of states with the highest percentage of seriously delinquent loans. 

About Author: Donna Joseph

Donna Joseph is a Dallas-based writer who covers technology, HR best practices, and a mix of lifestyle topics. She is a seasoned PR professional with an extensive background in content creation and corporate communications. Joseph holds a B.A. in Sociology and M.A. in Mass Communication, both from the University of Bangalore, India. She is currently working on two books, both dealing with women-centric issues prevalent in oppressive as well as progressive societies. She can be reached at donna.joseph@thefivestar.com.
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