Total home equity in the United States mortgage market has risen nearly $1 trillion year-over-year to $7.6 trillion, the highest level since 2007, according to the July Mortgage Monitor from Black Knight Financial Services.
"We've seen total home equity in the mortgage market expand by $825 billion in just the first five months of this year," said Ben Graboske, Black Knight's data and analytics senior vice president, in a Sept. 8 news release.
"When we look at the amount of equity available on each home with a mortgage — using an upper limit of 80% total combined loan-to-value, including first and second liens — we see that 59% of total net equity could be accessed by borrowers before hitting that limit."
Overall, Black Knight reported that there is $4.5 trillion in "tappable" equity available, with 39% of that in California alone. Additionally, the top 10 states in terms of available equity account for 74% of the $4.5 trillion total.
Additionally, Black Knight warned against assuming that the risk posed by second-lien home equity lines of credit has waned amidst the improved equity situation.
HELOC delinquency rates are at the lowest level since April 2007, and the first quarter of 2015 did have the highest weighted average credit score on record for HELOC originations. But half of existing HELOCs from before the financial crisis face draw-period expirations in the next 2.5 years, according to Graboske.
"These borrowers are looking at payment shocks of nearly $250 per month on average, and there are about 3 million of them — some 550,000 to 600,000 in the next six months alone," he said in the release. "Further, while equity positions are improving, 29% of those facing resets still have less than 10% equity in their homes, making refinancing their way out of payment shocks problematic."
