The average U.S. homeowner now has about $290,000 in equity thanks to substantial home price gains, according to CoreLogic’s latest homeowner equity report.
Home prices across the nation have increased for five straight months and posted a month-over-month increase of 0.7% in June, as the latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index data showed.
Resilient home prices helped U.S. homeowners gain roughly $13,900 in equity from the quarter before despite suffering year-over-year equity losses of $8,300 in the second quarter, according to the report. There were 6.3% fewer owners (about 75,000 borrowers) underwater compared with the previous quarter with only 2% of homeowners reporting bring underwater on their mortgage.
“While U.S. home equity is now lower than its peak in the second quarter of 2022, owners are in a better position than they were six months ago, when prices bottomed out,” CoreLogic Chief Economist Selma Hepp said.
“Also, while more borrowers are underwater compared with one year ago, they are not necessarily concentrated in markets that have seen the largest price declines, as negative equity also depends on the down payment,” Hepp continued. “Natural disasters and related risks also play a substantial role in home equity changes.”
If you are interested in pulling equity from your home, one option to consider is a cash-out refinance. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.
SHOPPING ON AN IMPULSE IS DERAILING AMERICAN BUDGETS – HERE’S HOW TO TAKE CONTROL
Less homeowners tapping into their equity
Higher mortgage rates have created fewer opportunities for homeowners to access the cash built up in their homes, according to a recent Black Knight report. Mortgage rates have hovered between 6% and 7% since the beginning of the year as the housing market reacts to the Federal Reserve’s restrictive monetary policy.
While higher rates have created affordability issues for most homebuyers, it has also made accessing home equity more expensive. Mortgage holders tapped $39 billion in equity in the second quarter of 2023 via cash-out refinances and home equity loans, a slight increase from the first quarter. However, the volume was roughly half of the $79 billion access in the first quarter of 2022 before rates began to rise, the report said.
“Historically, from 2010 to 2021, mortgage holders pulled out just under 1% of available equity each quarter,” Black Knight Vice President of Enterprise Research Andy Walden said. “But over the last three quarters, that share has fallen to 0.4%, which suggests rising rates have resulted in a roughly 55% decline in equity withdrawals. In essence, over the last 15 months, there’s been nearly $200B less equity withdrawn – and reinjected into the broader economy – than might otherwise have been, due in large part to elevated interest rates.”
If you want to take advantage of your increased home value, you can consider taking out a cash-out refinance. Visit Credible to find your personalized interest rate in minutes without affecting your credit score.
CAR INSURANCE RATES SET TO RISE ANOTHER 4% BY YEAR-END: SURVEY
Two ways homeowners usually access equity
Homeowners can access the cash built into their homes by refinancing their mortgage. In the current high-rate environment, this option will likely not make good financial sense, according to Black Knight.
A Home Equity Line of Credit (HELOC) is another option homeowners can use to tap the equity cash from their homes. Instead of taking out a home loan at a fixed amount, a HELOC is a revolving line of credit that typically offers better rates than a credit card that homeowners can access when needed. However, the central bank’s interest rate hikes have also impacted the cost of these loans, according to Black Knight.
“HELOCs were the beneficiaries of Q2/Q3 2022 30-year rate movements, with borrowers at times able to get lower rates on HELOCs than a cash-out refinance – a historically rare occurrence,” Black Knight said. “In the time since, HELOC rates have risen along with aggressive Fed rate hikes, with the average HELOC offering now above 8.5% for the first time in the 15+ years Black Knight has been tracking the data.
“Such HELOC rate increases have left borrowers without an overly attractive option to tap into their equity and have led to weaker withdrawal volumes this spring and summer, with second-lien withdrawals down by a little over 30% from the same time last year,” Black Knight continued. “However, HELOCs still remain the more attractive of the two options for homeowners needing to access equity without sacrificing record-low first-lien rates.”
If you’re looking to control the overall costs of withdrawing equity from your home, it could benefit you to shop around for the best rates. Contact Credible to speak to a home loan expert and get all of your questions answered.
GEN ZERS CREDIT CARD BALANCES GROW THE FASTEST: TRANSUNION
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Read the full article here
