Rising home values unlock tappable equity windfall
Home values in the United States reached a record high in March, creating a goldmine for existing homeowners and driving demand for tappable equity options.
According to the latest ICE HPI report, unadjusted home prices rose by 1.2% in March, higher than the 25-year average for the month. This marked the third consecutive month of above-average price gains nationally.
While the annual growth rate in home prices cooled slightly to 5.6% in March from 6.0% in February, the housing market remains far from a slowdown. The shortage of homes for sale continued to be a primary driver of the robust price growth.
“Prices, as well as the rate of growth, have remained firm despite rising rates and tightening affordability largely because of the continuing shortage of homes for sale,” the report stated.
While inventory levels improved slightly in March, there were still 38% fewer homes on the market than the 2017-2019 average.
The resilient home price growth translated into record-breaking levels of tappable home equity for existing mortgage holders.
“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,” said Andy Walden, vice president of enterprise at ICE.
At the end of Q1 2024, mortgage holders held a record $16.9 trillion in total home equity, of which $11 trillion was considered tappable equity available for access while retaining at least 20% equity.
“Homeowners with mortgages closed out the first quarter of 2024 with just a hair under $17 trillion in home equity – an all-time high,” Walden added.
Of that $17 trillion, a record $11 trillion was considered “tappable equity,” meaning homeowners could access a portion of it while still maintaining some cushion in their home value. This translates to an average of $206,000 in tappable equity per homeowner with a mortgage.
The typical mortgage holder had around $206,000 in tappable equity. Two-thirds of the tappable equity was held by homeowners with credit scores of 760 or higher, and the same share had mortgage rates below 4%.
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Five major West Coast metro areas – Los Angeles, San Francisco, San Jose, San Diego and Seattle – accounted for nearly a quarter of the total $11 trillion in tappable equity nationwide.
“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,” Walden said.
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