Rising home prices and conservative borrowing have today's homeowners sitting on a record amount of potential cash.
Today's mortgage holders saw their home equity increase by 4.8% annually at the end of the second quarter. This is a collective gain of nearly $428 billion, according to CoreLogic. Break it down by borrower, and the average homeowner with a mortgage gained $4,900 in home equity in just one year.
"Borrower equity rose to an all-time high in the first half of 2019 and has more than doubled since the housing recovery started," said Frank Nothaft, chief economist for CoreLogic. "Combined with low mortgage rates, this rise in home equity supports spending on home improvements and may help improve balance sheets of households who could take out home equity loans to consolidate their debt."
The amount of equity available for homeowners to tap reached a record high $6.3 trillion, according to a separate report from Black Knight in August. It defines tappable equity as the share of equity available for homeowners with mortgages to borrow against while still holding 20% equity in the home.
Homeowners, however, are sitting on their equity more than they have in the past.
Just $54 billion in equity was withdrawn in the first quarter of this year. That is the lowest volume in four years and the lowest share of available equity tapped since Black Knight began tracking the metric in 2008. Less than 1% of tappable equity was withdrawn. Cash-out refinance withdrawals fell from $27.9 billion in the fourth quarter of 2018 to $27.3 billion in the first quarter of 2019, despite a steep decline in mortgage rates.
"Rates are once again at another all-time low, yet interestingly enough, most homeowners are not taking advantage of the opportunity to inexpensively tap into their homes equity," said Matt Weaver, vice president of sales at CrossCountry Mortgage in Boca Raton, Florida. "My observation has been that the driving force behind this decision-making is based on residual fear from the last real estate crash. This event has since shifted the perspective of many homeowners to now view home equity as a nest egg rather than a bank account."
Of course all real estate is local, so some homeowners are gaining equity faster than others. In Idaho, homeowner equity increased by an average of $22,100; in Wyoming homeowners gained an average of $20,400; and in Nevada, gained an average of $16,800.
Homeowners in California, Washington state and Louisiana saw minimal gains in equity, and those in Connecticut and North Dakota actually lost home equity.
Rising home equity has also brought more borrowers out of a negative equity position, no longer owing more than their homes are currently worth. From the first to the second quarters of this year, the number of mortgaged residential properties in a negative equity position fell 7% to 2 million homes or 3.8% of all mortgaged properties.