Tappable home equity, meaning the equity homeowners could borrow against while leaving a 20% buffer, rose to a record $6.5 trillion in the first quarter, Black Knight said in a report on Monday.
More than 75% of homeowners with tappable equity have interest rates above 3.5%, the report said. With rates currently near 3%, the amount they would save each monthly likely would outweigh the cost of the transaction, the report said.
While cash-out refis might provide support to the economy in the future, as people tap equity to renovate homes or pay down credit cards, the levels have fallen this year, the report said.
“Driven by record-low 30-year mortgage rates, the first quarter saw overall refinance lending climb to a 7-year high,” the report said. “At the same time, the number of cash-out refinances, as well as the dollar value of equity withdrawn via refinance, fell for the first time since early 2019.”
Cash-outs accounted for 42% of refinance loans in the first quarter, the lowest share in four years, the report said. The $38.7 billion in equity withdrawn via cash-out refis was down 8% from the prior quarter.
Rising home prices have increased the equity Americans have in their properties. Home values are based on what comparable properties in the neighborhood sell for, so even if homeowners aren’t thinking of putting a property on the market, it increases their equity when nearby homes sell at high prices.
The median price of an existing home rose 4.9% in 2018 and 2019, according to the National Association of Realtors. It probably will increase 3.6% this year, the group said in a forecast on Monday.