Housing in Hercules, California, USA, Tuesday, May 31, 2022. Homebuyers are facing a deterioration in affordability, with mortgage rates remaining at their highest levels for more than a decade.
David Paul Morris | Bloomberg | Getty Images
Homeowners are in the money and it just keeps coming. The two-year surge in home prices has pushed the country’s total home prices to new highs.
A new analysis by mortgage software and analytics firm Black Knight shows that mortgage holders maintain an unprecedented $ 1.2 trillion increase in the first quarter of this year while maintaining a 20% equity cushion. , The amount you can withdraw from your home. This is the largest quarterly increase since the company started tracking numbers in 2005.
Mortgage holders’ so-called tappable equity increased by 34%, or $ 2.8 trillion, in April compared to a year ago. Total tappable equity was $ 11 trillion, double the previous peak in 2006. That’s an average of about $ 207,000 per homeowner.
According to Black Knight, tappable equity is primarily owned by high credit borrowers with low mortgage rates. Almost three-quarters of those borrowers have a rate of less than 4%. The current interest rate on 30-year fixed mortgages is over 5%.
The flip side of rising home prices is that future buyers are increasingly being priced by the market. Mortgage rates are also rising sharply, and some are putting home ownership even more out of reach.
“This is a really bifurcated landscape. It’s getting harder and harder for anyone trying to buy a home, but at the same time, they already own and have seen a significant increase in housing wealth over the last two years. It’s a boon to those who see it, “says Bengra Bosque. , President of Black Knight Data & Analytics. “Depending on where you are standing, this can be the best or worst of all possible markets.”
However, the housing market is showing signs of a slight chill. House prices measured by Black Knight in April rose 19.9% year-on-year, up from the 20.4% rise seen in March. The slowdown in growth may be an early indication of the impact of rising interest rates.
“The fall in April is likely a sign of a slowdown caused by a gradual rise in interest rates when interest rates first began to rise in late 2021 and early 2022,” Gravosuke said. “The March and April 2022 rate spikes will take some time to appear in the Repeat Sales Index.”
Rising interest rates have historically cooled home prices, but supply remains pathetic low in today’s markets. The active list is 67% below the pre-pandemic level, about 820,000 less than in the normal spring season.
Given current market conditions, homeowners are less likely to sell their homes and are more likely to use some of their vast assets for home remodeling. Home equity credit lines are currently preferred, as owners are likely not wanting to refinance their first mortgage to a higher interest rate, even when withdrawing cash.
A recent report from Harvard’s Joint Housing Center predicts that home renovation spending will increase by nearly 14% this year.
Sophia Weddin, a researcher at the Center’s Remodeling Futures Program, said: ..