Between the housing market turmoil, pandemic-era home price appreciation and consumer sentiment, lenders may want to consider incorporating more home equity lending into the mix, according to a column published by mortgage industry consulting firm STRATMOR.
According to data from CoreLogic, U.S. homeowners with mortgages — or roughly 63% of all properties — have benefited from a collective increase of $1 trillion in home equity levels since Q4 2021. In addition, data from Black Knight shows that tappable home equity has increased by $3.4 trillion over the last three years.
“This trend reversed to some extent in the final months of 2022,” the column notes. “As home price growth showed a slow, steady decline in most markets, home equity trends naturally followed suit. In the fourth quarter of 2022, the average borrower gained about $14,300 in equity year-over-year, compared with the $63,100 increase seen in the first quarter of 2022. Still, the amount of lendable home equity remains very high.”
In addition, more lenders are getting on board with home equity lending. According to a 2022 study by STRATMOR, 92% of surveyed lenders said they see that home equity products meet the needs of borrowers, while 85% said these products are “important for customer relationship[s].”
Reverse mortgages are not mentioned in the column, but senior-held home equity levels have been on the rise in recent years.
According to the quarterly Reverse Mortgage Market Index (RMMI) created by the National Reverse Mortgage Lenders Association (NRMLA) and data analytics firm RiskSpan, the collective senior housing wealth reached over $9 trillion for the first time in July 2021, and $8 trillion for the first time in April 2021. It had previously topped $7 trillion in March 2019.
Senior-held home equity fell for the first time since 2011 in Q4 2022, according to the latest RMMI release, but settled at $12.39 trillion. The last time a drop in senior-held home equity occurred, the total collective figure was just over $3 trillion.