Black Knight: Tappable Equity Falls for First Time Since Housing Recovery
Black Knight, Jacksonville, Fla., said softening home prices in equity-rich markets led to the first decline in tappable housing equity since the housing recovery began.
The company’s monthly Mortgage Monitor Report said total equity on mortgaged properties now stands at $9.8 trillion, $5.9 trillion of which is tappable. Tappable equity–the amount available for homeowners with mortgages to borrow against before hitting a maximum 80 percent combined loan-to-value ratio–fell by $140 billion in the third quarter.
The report also noted 43.6 million U.S. homeowners have tappable equity available, 272,000 fewer than in the second quarter. The average homeowner with at least 20 percent equity in their home has $136,000 in tappable equity available, $2,300 less than in the second quarter.
Black Knight Executive Vice President Ben Graboske said the drop in tappable equity resulted from “softening” home prices in equity-rich markets. The report said tappable equity declined in 60 of the nation’s 100 largest markets in third quarter; California alone accounted for nearly 75 percent of the total decline in tappable equity, as markets continue to react to rising interest rates and tightening affordability. Furthermore, three markets in California alone–San Jose, San Francisco and Los Angeles–accounted for 55 percent of the total net decline (Seattle was fourth, adding another 13 percent of the total decline).
“That is the first decline we’ve seen since the housing recovery began, and its cause can be traced directly to softening home prices in some of the nation’s most expensive–and equity-rich–markets,” Graboske said. “All were areas where home price growth has far outpaced the national average in recent years, but in which prices fell in Q3 2018–from as little as one percent in Los Angeles, to a 4.6 percent drop in San Jose.”
Despite the drop, Graboske noted total tappable equity is still near record highs and nearly $600 billion more than a year ago. “It’s also important to remember that in general third quarters are relatively flat as far as home prices are concerned, and that tappable equity is up on an annual basis in 98 percent of major metro areas,” he said. “But the fact remains that affordability concerns are beginning to have an impact on home prices, particularly in more expensive markets, and as a result, on homeowner equity as well.”
Other report data:
–U.S. loan delinquency rate: 3.64 percent in October, up by 8.19 percent from September.
–U.S. foreclosure pre-sale inventory rate: 0.52 percent, down by 0.54 percent from September.
–States with highest percentage of non-current loans: Mississippi, Louisiana, Alabama, West Virginia, Arkansas.
–States with lowest percentage of non-current loans: Colorado, Oregon, Washington, Idaho, North Dakota.
–States with highest percentage of seriously delinquent loans: Mississippi, Louisiana, Alabama, Arkansas, Tennessee.
