Mortgage holders have gained about $1 trillion in home equity collectively over the past year. On an individual basis, borrowers doing cash-out refinances are taking an average $65,000, which is comparable to what borrowers did in 2006, the height of the last housing boom. While the jump is significant, the volume is still nowhere near where it was back then. In fact, volume is still 80 percent below where it was at the peak in 2005.
That is not the only difference. Today's refinancer is in a far more solid equity position in his or her home, compared with borrowers then, who used their homes like ATMs, pulling out every available dollar. Even after tapping equity, the average resulting loan-to-value ratio for today's borrowers is 68 percent, meaning the borrower has only leveraged 68 percent of the home's current value. That is the lowest level in a decade.
"That reflects real strength of price appreciation and consumer sentiment," said Graboske.
The jump in cash-out refinances could be behind the strength in auto sales and home remodeling. The lack of homes for sale has caused many potential buyers to stay where they are, even though they have the equity to move up. In turn, they are using that equity to not only enhance their home but to add to its value.