Black Knight: Tappable Equity Surges $254 Billion in Q3 to All-Time High of $9.4 Trillion as Cash-Out Refinance Borrowers Pull Largest Quarterly Volume of Equity in 14 Years

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) announced its latest Mortgage Monitor Report, highlighting a record $9.4 trillion in tappable equity for homeowners as of Q3 2021. This represents a staggering $250 billion increase from the previous quarter, with a 32% rise year-over-year. Homeowners accessed their equity at the highest rate in over 14 years, with cash-outs making up 54% of all refinances. Despite rising home prices and interest rates, the current market shows significantly lower leverage and improved borrower credit scores compared to the pre-Great Recession era.

Positive

• Tappable equity reached $9.4 trillion, a record high.
• $250 billion increase in tappable equity from Q2 2021.
• Homeowners tapped into equity at the highest rate in over 14 years.
• Average homeowner's equity stake rose by $53,000.
• Cash-outs accounted for 54% of all refinancing.
• Lower average mortgage debt-to-home value ratio at 45.2%.
• Higher borrower credit scores compared to 2005.

Negative

• Monthly mortgage payments to purchase the average home jumped nearly 25% since the start of the year.
• Current affordability ratio reaches 22.4% of median income, the highest since late 2018.
• Potential rise in 30-year rates could worsen affordability.
• Inventory shortages persist, contributing to upward price pressure.

JACKSONVILLE, Fla., Dec. 6, 2021 /PRNewswire/ -- Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company's industry-leading mortgage, real estate and public records datasets. Though the rate of home price appreciation has begun to slow in recent months, the explosive growth of the last few years has driven tappable equity – the amount available for a mortgage holder to access while retaining at least a 20% equity stake in their home – to one new height after another. According to Black Knight Data & Analytics President Ben Graboske, a nearly-quarter-trillion dollar increase in tappable equity over the third quarter has resulted in not only yet another record high, but also the lowest total market leverage on record.

"Home price growth in the third quarter – while less than half that of Q2's history-making rate – added more than $250 billion to Americans' already record levels of tappable equity," said Graboske. "The aggregate total of $9.4 trillion is up an astonishing 32% from the same time last year and nearly 90% higher than the pre-Great Recession peak in 2006. As prices have surged over the past 18 months, the average mortgage-holder's equity stake has risen by $53,000. That works out to nearly $178,000 available in tappable equity to the average homeowner with a mortgage before hitting a maximum combined loan-to-value ratio of 80%. What's more, in the third quarter, homeowners tapped into their equity at the highest rate in more than 14 years as cash-outs made up 54% of all refinances.

"Data points like these inevitably, and understandably, lead to comparisons with the run-up to the Great Recession. It's therefore particularly important to note that the $70 billion extracted from the market via cash-out refis in Q3 2021 represents just 0.8% of the available tappable equity at the start of the quarter. For context, that's less than a third of the rate at which people were pulling cash out of their homes at the peak of such activity in 2005. Underwriting standards are much higher today as well, with the average credit scores of cash-out refinance borrowers more than 50 points higher than during that period, and the resulting LTVs are much lower. In fact, the average borrower's mortgage debt is just 45.2% of their home's value – the lowest total market leverage we've ever recorded, going back at least to the turn of the century. In short, it's a markedly different time and market today."

This month's Mortgage Monitor also examines the impact of rising prices and interest rates on home affordability, finding that the monthly mortgage payment (principal and interest) to purchase the average-priced home with 20% down has jumped by nearly 25% since the start of the year. Factoring in incomes as well as prices across the country, it now requires 22.4% of the median income to purchase the average-priced home with 20% down and a 30-year mortgage. This is the largest share of income required for a home purchase since late 2018, when interest rates were near 5%, but still far below the 34%+ payment-to-income ratio reached in 2006.

A ratio higher than 20.5% in recent years has correlated with a slowdown in the rate of home price growth, but today's inventory shortages continue to put upward pressure on prices. The slight improvements seen in for-sale listings this summer have begun to plateau, leaving the market with a 54% deficit in for-sale properties compared to 2017-2019 averages. Even if home prices held steady, a rise in 30-year rates to 3.5% would result in the tightest affordability since 2009. At 4%, payment-to-income ratios would rise above the 1995-2003 market average, and at 5% would drive affordability to its worst level on record outside of the 2004-2008 bubble. Much more detail on this and more can be found in Black Knight's October 2021 Mortgage Monitor Report.

About the Mortgage Monitor
The Data & Analytics division of Black Knight manages the nation's leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the Black Knight HPI and Collateral Analytics' home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

Black Knight's research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight
Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com/.

For more information:

Michelle Kersch	Mitch Cohen
904.854.5043	704.890.8158
michelle.kersch@bkfs.com	mitch.cohen@bkfs.com

 

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SOURCE Black Knight, Inc.

FAQ

What did Black Knight report about tappable equity on December 6, 2021?

On December 6, 2021, Black Knight reported a record $9.4 trillion in tappable equity, marking a $250 billion increase from Q2 2021.

How much of the tappable equity was accessed by homeowners in Q3 2021?

Homeowners accessed their tappable equity at the highest rate in over 14 years, with cash-outs representing 54% of all refinances.

What impact do rising interest rates have on home affordability according to Black Knight?

Rising interest rates have contributed to a 25% increase in monthly mortgage payments since the start of the year, making home purchases less affordable.

What is the current mortgage debt-to-home value ratio reported by Black Knight?

The average mortgage debt is reported at 45.2% of the home's value, the lowest total market leverage on record.

How does current home affordability compare to the pre-Great Recession period?

Current affordability ratios are low compared to 2006, when the payment-to-income ratio exceeded 34%.