American home equity is at an all-time high. Great for homeowners – not homebuyers.

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Published Date 8/14/2023

Many American homeowners are sitting on mini-goldmines, but few are talking about it. CNBC’s Dianna Olick, is, however, in her recent article that offers a snapshot of the state of American homeowners/home equity. She explains how home prices in June hit record highs in 60% of U.S. markets, according to a new report from Black Knight, saying its national home price index hit a new high in June, up 0.8% from June of last year — a stronger annual growth rate than May.

“Nearly every major market saw gains month to month, with the overall index gaining 0.67% from May to June,” says Olick. “Home prices are rising again, because there is far too little supply to meet the current demand. Higher mortgage rates have been a huge deterrent for current homeowners to list their homes for sale because they don’t want to trade up to these higher rates on another purchase.”

That mini goldmine we just mentioned? Home price growth has made homeowners see equity levels back to within 3% of last year’s peaks. “Total equity hit over $16 trillion with tappable equity, which is the amount most lenders will allow you to take out while still leaving 20% equity in the home, rising to $10.5 trillion, just 4% off its 2022 peak. Per homeowner, that is roughly $200,000 in cash sitting in the house, ready for the taking,” she says.

“As a result, negative equity, or so-called underwater borrowers, are nearly nonexistent in today’s market. Just 344,000 homeowners currently owe more on their homes than the properties are worth.”

According to Black Knight’s Andy Walden, that represents a 70% jump from this time last year, who adds, “Everything is relative.“There are less than half as many underwater homeowners than there were in 2019 before the onset of the pandemic, with only 3.9% having less than 10% equity, down from 6.6% in 2019.”

The downside? The destruction of home affordability for today’s potential buyers, which now stands at a 37-year low.

As a comparison as well as an interesting statistic, current homeowners (most of whom carry mortgages with rates between 3% and 4%), need just 21% of the median household income to make the average monthly mortgage payment — principal and interest. “Prospective homebuyers today are looking at paying more than 36% of their income on that payment thanks to higher home prices and higher rates,” says Olick.

CNBC, TBWS

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