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Monday, October 4, 2021

Borrowers Withdrew $63 Billion in Equity in 2nd Quarter of 2021

 Black Knight: As a result of rising home values, the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home.

JACKSONVILLE, Fla. – Black Knight estimates that borrowers pulled $63 billion in equity in the second quarter of 2021, the most in a single quarter in almost 15 years. There remains $9 trillion in tappable equity, a 37% year-on-year gain, due to surging home prices.

Home values have soared to such a degree that the average homeowner could refinance their mortgage and withdraw $173,000, while keeping 20% equity in their home; the sum of such tappable equity rose $20,000 for the average homeowner from the previous quarter.

Homeowners’ equity will cushion homeowners exiting forbearance, according to Black Knight’s Ben Graboske. Ninety-eight percent of homeowners still in forbearance as of mid-August have at least 10% equity, while 28% of mortgage holders were fully underwater in the last downturn.

Although mortgage originations had fallen 5% from the first quarter, it was the fourth straight quarter to post over $1 trillion in total lending, and more than 2.2 million people opted to leverage rising home values and low rates and refinance their homes.

More than 50% of borrowers who exited their forbearance plans in April and May 2020 fully repaid their mortgages, likely due to low rates encouraging refinancing – but more borrowers who are now leaving forbearance are remaining in loss mitigation programs.

Source: HousingWire (09/08/21) Kromrei, Georgia

© Copyright 2021 INFORMATION, INC. Bethesda, MD (301) 215-4688

Rising Prices Push Home Equity to Its Highest Level in 10 Years

 By Alex Veiga

Homeowners with a mortgage gained an average $51,500 in home equity in the second quarter – a 29.3% year-to-year increase. It’s the biggest jump since 2Q 2010.

LOS ANGELES (AP) – Soaring home prices have pushed up average homeowner equity growth to the highest level in more than a decade, though recent signs of a cooling U.S. housing market point to more moderate gains in the second half of the year.

Homes with a mortgage gained an average of $51,500 in equity in the second quarter, an increase of 29.3% from the April-June quarter last year, according to real estate information company CoreLogic. That’s the highest quarterly average gain in home equity since the second quarter of 2010, the firm said.

That works out to nearly $3 trillion in equity gained by U.S. homeowners with a mortgage, which is about 63% of all homes, CoreLogic said. Average homeowner equity jumped nearly 20% in the first quarter from a year earlier.

Home equity growth can have broad impacts on the economy, giving homeowners more financial flexibility to spend on big purchases or build a nest egg. Rising home values also make it increasingly tougher for would-be homeowners to buy.

Homeowners in California, Washington state and Idaho saw among the biggest average equity increases in the second quarter: $116,000 in California, $103,000 in Washington state and $97,000 in Idaho.

The surge in homeowner equity gains follows a record run up in U.S. home prices this year amid a searing hot housing market fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic.

S&P said this week that its closely watched S&P CoreLogic Case-Shiller 20-city home price index surged 19.9% in July from a year earlier, the largest gain on records dating back to 2000.

Still, there are signs the soaring home price gains fueling homeowner equity may have peaked. The National Association of Realtors’ most recent housing market snapshot showed the median home price of previously occupied U.S. homes rose 14.9% in August from a year earlier to $356,700. That’s a more modest gain than earlier this year, when year-over-year increases were running at 20%-25%.

“It seems that there was that shift from July to August where there starts to be a little bit of pushback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker.

Wolf projects that U.S. home price growth will slow to about 5% next year, citing expectations of modestly higher mortgage rates and a small but notable increase in the number of homes on the market.

“The days of runaway home price growth are behind us,” she said.

In its most recent quarterly housing forecast, mortgage buyer Freddie Mac envisions home prices growing 5.3% next year, down from a projected 12.1% increase in 2021.

If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the outsized growth in homeowner equity this year will have ripple effects for the broader economy, and the housing market. Rising homeowner equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their equity to pay off high-interest debt or finance large purchases, such as home improvement projects, which can give a boost to the economy.

“It is good for wider economic growth, but there’s an ugly side to today’s level of pricing,” Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”

The surge in home prices this year has made it tougher for would-be homeowners to buy. First-time buyers accounted for 29% of home sales in August, according to the National Association of Realtors. A year ago they made up 33% of buyers.

The U.S. homeownership rate was 65.4% in the second quarter, down from 66.6% last year and 66.2% a decade ago.

The increase in home equity has helped limit the number of homeowners who end up “underwater” on their mortgage, or owing more on their loan than their home is worth. Also known as being in negative equity, that can happen when a home’s value declines, or when the size of the mortgage increases, say when someone takes out a home equity loan.

At the end of the second quarter, 1.2 million homes, or 2.3% of all U.S. homes with a mortgage, were in negative equity, CoreLogic said. That’s down 30% from the same quarter last year.

Among U.S. metropolitan areas, Chicago had the biggest share of homes with negative equity in the April-June quarter at 5.2%, the firm said.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Housing Affordability Hits Its Lowest Point in 13 Years

 When calculating affordability, low mortgage rates have offset rising home prices so far, but 75% of U.S. counties are now less affordable than their historical average.

MIAMI – According to ATTOM Data Solutions LLC, about 75% of counties across the country were less affordable than their historical average during the third quarter of 2021 – an increase from 56% of counties one year earlier (third quarter of 2020) and the worst rate since 2008.

ATTOM reports that 430 out of 572 counties analyzed in the third quarter of 2021 are less affordable than their past averages, up from 317 counties.

The rising lack of affordability comes as the median national home price shot up 18% over the last year to about $315,500. Major ownership costs on the typical home consumed 24.9% of the average national wage of $64,857 in the third quarter, up from 24.3% in the second quarter of 2021 and 22.3% in the third quarter of last year. Lenders generally consider 28% as a ceiling.

The report also found that total homeownership costs are only below 28% in 303 of the counties analyzed.

Home prices have been going up for 10 years, and in the third quarter of 2021, about 67% of counties saw year-over-year price increases of at least 10%. The biggest price increases among counties with at least 1 million people include Middlesex County, near Boston, where prices are up 32% over the same time last year, as well as Arizona’s Maricopa County, up 24%.

ATTOM found homeownership most affordable in three Pennsylvania counties: Schuylkill County at just 9.5%, Fayette County at 10.6%, and Cambria County at 10.9%.

Counties that require the highest share of wages to afford a home include Kings County in Brooklyn (78.7% of weekly wages), Santa Cruz County, California (77.7%), Marin County, California (75.1%), and Maui County, Hawaii (66.2%).

The quickly rising pace of home prices may be starting to even out, however, which may help affordability. In August 2021, about 46.1% of homes sold for more than their initial list price, down from 47.2% in July and from a June peak of 50.4%.

Source: South Florida Business Journal (09/30/21) Medici, Andy

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688