Home Equity Lending News

$1.8 tril in Tappable Equity Evaporates During 2nd Half 2022

Second mortgage lenders saw the amount of homeowner equity available to lend against diminish by $1.8 trillion during the second half of last year thanks to continued month-over-month declines in home values.

Seasonally adjusted national home prices in December 2022 moved lower 0.45 percent from a month prior based on the Black Knight Home Price Index. Compared to December 2021, the index was up 5.0 percent — the slowest home price growth rate since June 2020.

At the current pace, year-over-year home price changes could go negative in three months, Black Knight said.

Home prices currently sit 5.3 percent below their summer peak.

The softening real estate market has wiped away 13 percent – or $2.3 trillion — in mortgage holder equity over the past two quarters, according to the report. That put total equity at around $17.7 trillion as of mid-year 2022 and roughly $15.4 trillion as of Dec. 31 based on a simple analysis of Black Knight’s numbers.

Tappable equity, the amount available to lend on while maintaining an 80 percent combined loan-to-value ratio, was slashed by 15 percent during the second half of last year. That worked out to $1.8 trillion less in potential second mortgages. Using the $1.8 trillion and 15 percent metrics suggests that tappable equity went from in the neighborhood of $12.0 trillion as of June 30, 2022,  to around $10.2 trillion at the end of the fourth quarter.

“With Q4’s decline, tappable equity levels are now down (-1 percent) year-over-year, marking the first decline in the [dollar] volume of equity available to lend against since 2012,” Black Knight stated.