Published on July 17, 2018
Written by The Servion Group
U.S. homeowners now have a record $5.8 trillion in tappable equity available but so far they don't seem eager to use it.
As home values around the country continue to rise, home equity lines of credit, which are often used to access home equity, have plateaued, and the total amount of money people are taking out of their homes is dropping.
Home equity trends by the numbers
("Tappable equity" is the appraised value of a home minus 20 percent).
Why are HELOCs flat?
There are a few reasons, according to Ben Graboske, executive vice president of Black Knight's data and analytics division. Graboske says the typical home owner isn't necessarily paying attention to the market and may not know just how much money they have.
"They're probably not studying the numbers," he said to CNBC. "The average home owner doesn't have that level of awareness."
Variable rate concerns
Another reason homeowners may be shying away from using equity is that HELOCs have variable interest rates. And in a rising rate environment, rates can change relatively often, and that means people don't have as much certainty about what their monthly payments will be.
The few borrowers who are tapping their equity are doing it more through cash-out refinances, even though they have higher rates, in order to avoid the uncertainty.
An opportunity for lenders?
With available home equity at record levels, lenders might benefit from simply asking clients whether they have thought about tapping their equity to fund that next big home project. Discussing the situation with homeowners and making them aware that they may have such a readily available source of funds can benefit both homeowners and financial institutions.