Black Knight: ‘Tappable’ Equity Continues To Grow

Due to rising home prices, about 1 million more homes in the U.S. returned to positive equity positions over the first three quarters of 2016, according to Black Knight Financial Services’ Mortgage Monitor report.

As of the end of November, more than 39 million homeowners had “tappable” equity in their homes, meaning they had current combined loan-to-value ratios of less than 80%, according to the report.

In total, these U.S. homeowners had about $4.6 trillion in tappable equity, which is within 6% of the peak seen in 2006.

Only about 2.2 million homeowners – or about 4.4% of all homeowners with a mortgage – were in negative equity, which is the fewest since early 2007, according to Black Knight’s data.

The report shows that homes in the bottom 20% by price are nine times more likely to be underwater than those in the top 20%.

As Ben Graboske,¬†executive vice president of Black Knight’s data and analytics division, explains, there is a distinct geographical component at work with regard to both the negative and the tappable equity sides of the equation.

“The negative equity situation has improved substantially since the height of the Great Recession,” Graboske says in a release. “There are now just 2.2 million homeowners left in negative equity positions – a full 1 million fewer than at the start of 2016. Whereas negative home equity was once a widespread national problem – with roughly 30 percent of all homeowners being underwater on their mortgages at the end of 2010 – it has now become much more of a localized issue.

“By and large, the majority of states have negative equity rates below the national average of 4.4 percent,” Graboske says. “There are, though, some pockets where homeowners continue to struggle. Three states in particular stand out: Nevada, Missouri and New Jersey, all of which have negative equity rates more than twice the national average. Atlantic City leads the nation, with 23 percent of its borrowers underwater, followed by St. Louis at 20 percent. We also see that lower-priced homes – those in the bottom 20 percent of prices in their communities – are nine times more likely to be underwater than those in the top 20 percent.

“On the other hand, we’ve also seen a steady increase in the number of borrowers with tappable equity in their homes, meaning they have current combined loan-to-value ratios of less than 80 percent,” he adds. “There are now some 39 million such borrowers, with a total of $4.6 trillion in available, lendable equity. That works out to an average of about $118,000 per borrower, making for the highest market total and highest average per borrower we’ve seen since 2006.”

However, Graboske points out that homeowners are tapping into their equity less than they used to during the pre-crisis years. Although total equity tapped via first-lien refinances hit a seven-year high of more than $70 billion over the first three quarters of 2016, it was still less than two percent of available equity to be tapped.

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