Rising interest rates might be sidelining would-be homebuyers, but the ongoing shortage of inventory on the market is keeping home prices elevated. That’s why U.S. homeowners now have a record $11 trillion in tappable equity as of March, according to the May ICE Mortgage Monitor Report.
Home-price growth eased slightly in March by 5.6%, compared to the same time a year ago, and slowed from an upwardly revised 6% in February. However, monthly price gains are still 25% above the 25-year average, with home prices up 1.2% on an unadjusted basis for the month, ICE reported.
“The recent trend of rising interest rates has dampened homebuyer demand and allowed the inventory of homes for sale to improve,” Andy Walden, ICE’s vice president of enterprise research strategy, said in a news release. “We’re still very much in a hole from an inventory perspective, but that deficit has fallen from 50% a year ago to 38% in March.”
He added, “Today, with 3.3 months of supply, inventory is still historically low and indicative of a seller’s market. This is helping to keep home-price growth resilient even though demand is down. In fact, despite some minor slowing, March marked the third consecutive month of stronger-than-average growth.”
Based on the company’s mortgage, real estate and public records data sets, the ICE report also found that homeowners have a record $16.9 trillion in equity, with $11 trillion of that considered “tappable.” That translates to an average of $206,000 per borrower with tappable equity, up significantly from $185,000 a year ago.
“Tappable” equity refers to the portion of a borrower’s home value they can access in cash while still maintaining a 20% equity share in their property.
For lenders, there’s a lower level of risk in offering second mortgages to these homeowners, because two-thirds of the country’s tappable equity is held by borrowers with credit scores of 760 or higher.
Seven metropolitan markets—Los Angeles, San Francisco, San Jose, San Diego, Seattle, New York and Washington, D.C.—account for about $3.8 trillion of total tappable equity in the United States. These borrowers also tend to have low mortgage rates on their primary mortgage, likely due to refinancing when interest rates hit record lows during the COVID-19 pandemic.
“For folks like these, second-lien equity products remain a particularly attractive option for tapping significant amounts of housing wealth without sacrificing a once-in-a-lifetime low rate on their existing mortgage,” Walden said.
Meanwhile, housing markets in the Northeast saw the biggest monthly price gains in March. New Haven (up 1.3%) and Hartford, Connecticut (1.1%) topped the list, with the New York City metropolitan area (1.0%), Boston (0.9%), Bridgeport, Connecticut (0.9%) and Allentown, Pennsylvania (0.8%) recording six of the seven largest single-month price gains among the nation’s top 100 metros.
Farther south, Florida’s nine largest markets saw seasonally adjusted prices edge lower with a jump in for-sale inventory statewide.
Inventory levels in Lakeland, Palm Bay, Deltona and Cape Coral returned to pre-pandemic levels as North Port, Tampa, Orlando and Jacksonville reached 10% of their 2018-19 levels. Although Miami’s housing stock is climbing, it’s 27% lower than it was prior to the pandemic, ICE reported.
