Mortgage News March 7, 2023
During the second half of last year, the amount of home equity available for second mortgage lenders declined by $1.8 trillion due to continued monthly declines in home values.
Using the Black Knight Home Price Index, seasonally adjusted national home prices fell 0.45 percent from a month earlier in December 2022. Since June 2020, home prices have grown at the slowest pace since December 2021, up 5.0 percent.
A year-over-year decline in home prices could occur within three months if current trends continue according to Black Knight.
Prices for homes are currently 5.3 percent lower than they were compared to the peak price during the summer.
According to the report, over the past two quarters, mortgage holder equity was reduced by 13 percent – or $2.3 trillion due to the real estate market slowdown. Based on the numbers from Black Knight, total equity is estimated to be around $17.7 trillion by mid-2022 and roughly $15.4 trillion at the end of the year.
During the second half of last year, tappable equity, which is the amount that can be borrowed with an 80 percent combined loan-to-value ratio, decreased by 15 percent. As a result, potential second mortgages were reduced by $1.8 trillion. As of June 30, 2022, tappable equity was approximately $12.0 trillion, and it was around $10.2 trillion by the end of the fourth quarter based on the $1.8 trillion and 15 percent metrics.
Black Knight stated that the decline during Q4 brought tappable equity levels to a year-over-year low (-1 percent) for the first time since 2012.
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