Strong home price growth – propelled by a lack of inventory – pushed U.S. mortgage holders’ tappable equity to a record $11 trillion in March, according to ICE Mortgage Technology’s Mortgage Monitor report.
Though the inventory situation has improved slightly, a continuing deficit of homes for sale this spring is helping prices remain resilient, ICE says.
As a result, home prices increased 1.2% in March, more than 25% above the 25-year average increase, marking the third consecutive month of above-average home price gains.
This, in turn, boosted average homeowner equity to historic highs: The average of level of equity per borrower in March was $206,000, up from $185,000 in March 2023.
Two thirds of all tappable equity is held by homeowners with credit scores of 760 or higher, making for a relatively low-risk lending cohort, ICE notes.
An equal share – two thirds – is held by homeowners with first lien mortgage rates below 4%, with 84% (~$9.2T) held by those with rates lower than 5%
“Such strong price gains continue to plague would-be homebuyers in today’s higher-rate environment, but for existing homeowners the picture keeps growing brighter,” says Andy Walden, vice president of enterprise research strategy for ICE, in the report. “Homeowners with mortgages closed out the first quarter of 2024 with just a hair under $17 trillion in home equity – an all-time high. Of that, a record $11 trillion is tappable, meaning available for a homeowner to leverage while retaining a 20 percent equity cushion in the property. On average, that works out to roughly $206,000 in tappable equity per mortgage holder.”
Just five West Coast metros – Los Angeles ($1.1 trillion), San Francisco ($648 billion), San Jose ($348 billion), San Diego ($331 billion), and Seattle ($324 billion) – account for nearly a quarter ($2.7 trillion) of total tappable equity.
“Not only do these borrowers hold a cumulative $2.7 trillion in tappable equity, but they also tend to have first lien interest rates well below the national average due to more frequent refinance activity among high-balance loans,” Walden says.
“The same holds true in other metropolitan areas such as New York and Washington DC, which account for another $1.1 trillion in tappable equity,” Walden adds. “For folks like these, second lien equity products remain a particularly attractive option for tapping significant amounts of housing wealth without sacrificing a once-in-a-lifetime low rate on their existing mortgage.”
Photo: Tosab Photography