Home equity sees largest December monthly growth in history, data shows

After a surge in the housing market amid the pandemic, home price growth began to slow at the end of last summer and into the fall. However, new data from Black Knight showed that home prices picked up again at the end of 2021 and the beginning of 2022. 

In fact, the average home increased in value by 0.84% in December – the largest single-month growth of any December on record, Black Knight’s latest Mortgage Monitor report showed. 

As home values rise, an increasing number of homeowners are beginning to look at tapping their home equity. However, the number of homeowners that could get a lower monthly payment through refinancing has dropped as of late due to increasing interest rates, the report said. In the first weeks of 2022, there were less than 6 million high-quality refi candidates — a 45% drop from the previous 11 million — as interest rates continue to rise. 

"While paling in comparison to the nearly 19 million candidates just over a year ago, this still surpasses the average population during the 10-year span prior to the pandemic," Black Knight’s report stated. 

If you are interested in taking out a cash-out refinance on your home, visit Credible to find your personalized interest rate in minutes without affecting your credit score.

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Available home equity hits new record

Surging home values pushed tappable equity, or the amount of funds homeowners can access from their home while maintaining relatively conservative underwriting guidelines, to new highs in 2021. Total tappable equity reached $9.9 trillion in 2021, up 35% from 2020, according to Black Knight. 

The $2.6 trillion increase in 2021 is "by far the largest single year gain on record, more than doubling the $1.1 trillion growth seen in 2020," the report said. 

On an individual level, the average borrower has $185,000 in tappable equity available to them while retaining a 20% loan-to-value ratio (LTV) in their home, equating to a one-year increase of $48,000, according to Black Knight.

Tapping your home equity through a cash-out refinance could help you fund home improvement projects, pay off high-interest debt and more. You can visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

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Affordability worsens for homebuyers 

While rising home values are beneficial to homeowners, homebuyers have struggled in today’s competitive housing market, Black Knight said. Higher home prices and rising interest rates have pushed affordability higher, leaving buyers with increased monthly payments and down payment amounts on their home purchases. 

"Interest rate jumps in recent weeks have pushed us – and quite quickly – above the long-term, pre-Great Recession average payment-to-income ratio of 25%, straight to the worst affordability levels since 2008," Ben Graboske, Black Knight data & analytics president, said. "In response, our Optimal Blue rate lock data shows homebuyers are increasingly choosing to pay more in points to buy down the rates on their mortgages to partially offset the effect of recent rate increases, further increasing the burden on today’s homebuyers."

Currently, it requires 25.8% of the median household income to make a payment on a 30-year mortgage, which increased from 22.4% at the end of the third quarter of 2021, according to the data. Black Knight predicted that a shortage of available homes for sale could continue to push home prices higher in the months to come. 

If you are interested in buying a home or want to see how much equity you can access in your current home, contact Credible to speak to a home loan expert and get all of your questions answered.

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