Home Equity Reaches New Heights | An AMC Nationwide Appraisal
Total home equity just passed $6 trillion for the United States’ 44 million homeowners, and the average homeowner gained $16,000 in home equity in one year alone. US homeowners possess 21% more equity than in 2006, before the housing bubble popped, and three times more than in 2012, when the market bottomed out.
However, homeowners aren’t taking advantage of their rising equity. Cash-out refinances decreased 3% from the previous year, the lowest level since Q1 2014, according to a report by Black Knight. Withdrawals from HELOCS were down 4%.
Rising interest rates appear to be the culprit, just as they were in Q1 2014. The rate of equity growth also slowed in Q2 2018: in Q1 equity grew by $308 billion, whereas in Q2 equity grew by $256 billion. Higher interest rates and slower growth discourage homeowners from tapping their home equity. That will likely change in the future.
“With the sorry state of emergency savings and increasing levels of consumer debt in a rising interest rate environment, it is a matter of when, not if, more homeowners turn to home equity to fund home improvements and repairs or consolidate debt,” predicted Greg McBride, chief financial analyst at Bankrate.com.
Also, a shortage of construction materials is depressing new housing construction, increasing housing prices. With the trade war still escalating, the situation seems unlikely to change. As housing prices rise and equity steadily increases, more homeowners will begin drawing cash from their homes.