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The Era of House-Rich Americans At Hand

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According to recent reports, more Americans homeowners are sitting on a potential cash source and have no plans to sell despite the unprecedented increase in home equity at the end of the second quarter. 

These house-rich Americans are unfazed with the rising home prices, according to a report by CoreLogic. Mortgage holders have seen their home equity value increase around 4.8% annually with a gain of about $428 billion. To break this value per borrower and you’ll get a gain of $4,900 in home equity in a year.

Frank Nothaft, head economist of CoreLogic stated that borrower equity increased in the first half of the year. He also said that this value had increased more than twice since the housing recovery began. 

Nothaft also said that this trend, combined with low mortgage rates, supports homeowner spending improvement projects which can balance households who could take home equity loans to consolidate their debts. 

A record high of $6.3 trillion is the available equity amount for homeowners based on another report from Black Knight last month. The report referred to available equity as the share available for homeowners that have mortgages to borrow against as 20% equity remains in their properties.

But homeowners won’t give in. They are sitting on equity longer compared to what they have done in the past. 

Still, according to Black Knight, only $54 billion in equity was consumed in the first quarter of 2019. This is the lowest in four years and the lowest seen by the agency. This was less than 1% of the available equity. 

Aside from this, cash-out home refinance withdrawals also decreased from nearly $28 billion in the final quarter of 2018 to only $27.3 billion in the first quarter of this year. This value was despite a considerable reduction in mortgage rates. 

Matt Weaver, sales VP of CrosssCountry Mortgage headquartered in Boca Raton, FL also noticed an interesting trend. He said that homeowners are not using this opportunity to tap into their equities. However, he cited that this may be due to a fear of the previous real estate crash. This major event has switched the thinking of most homeowners to view their home equity as an investment.

And real estate values are local; therefore, some homeowners are experiencing an increase in equity more than others. There is an average increase of $22, 000 in Idaho, in Wyoming around $20,000. In Nevada, a slight increase of $16,000 was observed. Homeowners in Louisiana, California and Washington state experienced minimal gains while those located in North Dakota and Connecticut experienced a loss.