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The Tappable Equity Slide

home prices

home pricesThirty-year fixed mortgages fell to their lowest point in over a year, and tappable equity has fallen for the second consecutive quarter, according to the latest Mortgage Monitor [1] report from Black Knight [2]. Black Knight notes that the decline in equity shouldn’t impact the market as a whole.

“After reaching a high of $6.06 trillion in Q2 2018, tappable equity has since fallen by $348 billion, with $229 billion of that total coming in the fourth quarter alone,” said Ben Graboske, President of Black Knight’s Data & Analytics division. “Once again, the decline is being driven by falling home prices in some of the nation’s most expensive markets. In California—where the average home price fell by $14,600 over the last six months of 2018—tappable equity fell by more than $200 billion over that same time period, making up more than 60 percent of the total national decline. Keep in mind, though, that despite this pullback, California continues to hold 37 percent of all the tappable equity in the country, and six-and-a-half times as much as Texas, the next closest state. It’s also important to note that upwards of 80 percent of the national equity loss was among homeowners who had more than 20 percent equity in their homes. So while the decline does reduce the borrowing power available to these homeowners, it does not represent a significant increase in equity stress on the market as a whole.”

“The fact is,” Graboske continues, “homeowners have been tapping equity less and less.” According to Graboske, equity withdrawals were down 16 percent year-over-year in February,

Black Knight also found that total foreclosure starts declined in February, down by 19.5 percent, a slightly stronger decline than the 10-year 14 percent month over month average. However, Black Knight notes that delinquencies have increased in February, the first increase for the month in 12 years, and only the second such increase in 15 years, including 2008-2010 when double-digit annual increases were the norm.