Most At-Risk Owners Have Enough Equity to Avoid Foreclosure
Foreclosure listings will likely only come from owners in trouble before the pandemic because the amount of equity owners can access has risen 40% year-to-year. Of U.S. homeowners in forbearance, 98% have at least 10% home equity; during the Great Recession it was only 40%.
JACKSONVILLE, Fla. – According to Jacksonville-based Black Knight Inc.’s July 2021 Mortgage Monitor Report, homeowners “tappable equity” – the amount over a base 20% equity that they’re about to take out – has soared over the past year.
According to Black Knight Data & Analytics President Ben Graboske, continued heat in the housing market drove Americans’ tappable equity to never-before-seen levels in the second quarter of 2021.
“Tappable equity grew an astonishing 37% year-over-year in Q2 2021, driven by increasing gains in home values over the quarter,” says Graboske. “As of the end of June, home values had risen nearly 20% from the year before and 7.4% in Q2 alone. As a result … homeowners with mortgages gained another $1 trillion in tappable equity in the second quarter alone. This is by far the strongest growth we’ve ever seen and equates to some $173,000 in equity available to the average mortgage holder, a $20,000 increase in just three months.”
While frustrated homebuyers may be hoping that owners currently in forbearance will have to sell or go through foreclosure once their forbearance period ends, Graboske says about 98% of homeowners in forbearance have at least 10% equity.
“Even when we add in 18 months of forborne payments – including principal, interest taxes and insurance – the share with less than 10% equity only climbs to 7%, or about 135,000 homeowners,” says Graboske. “This is a drastically different dynamic than during the worst of the Great Recession, when more than 40% of all mortgage holders had less than 10% equity and 28% were fully underwater.”
Black Knight’s report also suggests that current homeowners might also be less hesitant to tap their stores of available equity. Q2 2021 marked the fourth consecutive quarter with over $1 trillion in originations, and the fifth consecutive quarter with at least 2.2 million refinances.
© 2021 Florida Realtors®