The combination of rising home prices and falling mortgage rates has U.S. homeowners sitting on a veritable fortune in home equity. The collective amount of money borrowers could pull out of their homes, while still retaining 20% equity, hit a record $6.3 trillion in the second quarter of this year, according to a new reading from Black Knight, a mortgage servicing and analytics company.
The collective amount of money borrowers could pull out of their homes, while still retaining 20% equity, hit a record $6.3 trillion in the second quarter of this year, according to a new reading from Black Knight, a mortgage data, technology and analytics company.
The combination of rising home prices and falling mortgage rates has U.S. homeowners sitting on a veritable fortune in home equity. Falling mortgage rates over the past several months have caused a surge in overall refinance activity, but despite the record housing wealth, homeowners have been highly conservative about taking cash out. In 2006, 89% of refinances were cash-out, according to Freddie Mac. In 2012, when home prices crashed, that share dropped to 12%. But even now, with prices back above their previous peak and mortgage rates much lower, cash-out refinances are just 61% of the total pool of refinances.
Homeowners may now be concerned that the heat in home prices is not only cooling, but that prices in some markets may actually fall. Prices were still gaining by 3.1% annually in June, according to the latest S&P CoreLogic Case-Shiller national home price index, but that is half the gain that homeowners were seeing a year ago.
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