Higher home prices may be frustrating potential homebuyers, but they are funneling a strong new flow of "tappable" cash into homeowners' pockets.
How much: $260 billion in additional home equity just in the first quarter of this year. With that increase, 38 million borrowers now have at least 20 percent equity in their homes — averaging about $116,000 per borrower, according to Black Knight Financial Services. That is a far cry from just 24 million who had that much equity when home prices finally hit bottom at the start of 2012.
"As we approach the 10-year anniversary of the pre-crisis peak in U.S. housing prices, we're just under 3 percent off that June 2006 peak nationally, and 23 states have already passed their 2006 peaks," said Ben Graboske, executive vice president at Black Knight Data & Analytics. "The result is that equity levels are rising nationwide for the most part."
With mortgage rates falling to near record lows, refinancing is surging again. Applications to refinance jumped 21 percent a week ago, after the full effect of the Brexit vote hit the U.S. bond market, driving yields to new lows. Mortgage rates loosely follow the yield on the 10-year Treasury. Even before the big rate drop, refinances represented 40 percent of all closed loans in April, according to Ellie Mae.
Borrowers today, however, are still cautious. While 42 percent of refinances in the first quarter of this year were "cash-out," homeowners only tapped a collective $20 billion. That may sound like a lot, but it was just one half of 1 percent of the cash available to borrowers, according to Black Knight.