Black Knight: Total ‘Tappable’ Equity Up, But Homeowners Being ‘Prudent’

Thanks to rising home prices, the total “tappable” equity in U.S. borrowers’ homes reached about $260 billion as of the end of the first quarter – an increase of 6% compared with the first quarter of 2015, according to Black Knight Financial Services’ Mortgage Monitor report.

An additional 425,000 borrowers got out from underwater on their mortgages during the quarter, according to the report.

About 38 million borrowers now have at least 20% equity in their homes, at an average of $116,000 per borrower, Black Knight says.

Still, about 2.8 million borrowers remain in negative equity. Although this is down 13% from the first quarter of 2015, it is nearly five times as many as in 2004.

“As we approach the 10-year anniversary of the pre-crisis peak in U.S. housing prices, we’re just under three percent off that June 2006 peak nationally, and 23 states have already passed their 2006 peaks,” says Ben Graboske, executive vice president of the data and analytics division of Black Knight Financial Services. “The result is that equity levels are rising nationwide for the most part.”

Graboske points out that the additional 425,000 borrowers who regained equity brought the national negative equity rate down to just 5.6%.

“That’s a far cry from the nearly 29 percent of borrowers who were underwater at the end of 2012 but still about five times as many as in 2004,” he says.

Although more borrowers are now in positive equity, “they are being prudent when it comes to drawing upon that equity,” Graboske says.

“Just $20 billion in equity was tapped via cash-out refinances in [the first quarter] – roughly one-half of one percent of total available equity,” he says. “Even so, cash-outs still accounted for some 42 percent of all refinance activity in [the first quarter].”

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