Nationwide home equity has increased by nearly $1 trillion in the 12 months ended in May. Equity is now at the highest level since 2007. In this month’s Mortgage Monitor Black Knight Financial Services look at topics related to that growing equity; where it is, what homeowners might do with it, and the continuing repercussions from what they have done about it in the past.
Black Knight Data & Analytics Senior Vice President Ben Graboske said, “We’ve seen total home equity in the mortgage market expand by $825 billion in just the first five months of this year. At $7.6 trillion, total net equity is nearly 2.5 times more than it was at the end of 2011, and is at the highest level it’s been since the start of the housing crisis. To put this growth in perspective, consider that the average American homeowner with a mortgage has about $19,000 more equity in his or her home today than a year ago.
Including both first and second liens the national as a whole has a combined loan to value ratio (CLTV) of about 57 percent. Graboske points out that this growth in available equity has direct implications for borrowers’ ability to access the equity in their homes.
Using the amount of equity available on each home with a mortgage (with a CLTV of 80 percent as an upper limit), “we see that 59 percent of total net equity could be accessed by borrowers before hitting that limit,” he says. So in total there are over 37 million borrowers that have what Black Knight calls “tappable” equity. The company puts the range from an average of about $42,000 for those homeowners in the bottom 20 percent of home value to $267,000 for those in the top 20 percent, a nationwide average of $120,000.
But we have here yet another example of location, location. Black Knight found that, of the $4.5 trillion in tappable equity, $1.7 trillion – or 39 percent – is in California, dwarfing by a factor of six the second state, Florida, with an estimated $278 billion. Los Angeles alone has 14 percent of the nation’s total available equity. By volume, the top 10 states ranked by available equity account for 74 percent of total tappable equity, while the top 10 metro areas account for over half.
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