Tappable Equity In Homes Declining

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One thing that can help you hedge against a recession is tapping into your home’s equity to ensure you have cash on hand as the economy declines. From the current and estimated numbers, it looks like you need to tap into your equity now.

The biggest reason for making a move today is based off of home-price growth as we get deeper into the year.

Annual home-price growth shifted from deceleration to decline in July as the median home price fell 0.77% from June – the largest single-month decline since January 2011. This is according to Black Knight who reporting these statistics in its July Mortgage Monitor Report. Escalating declines in June and July have total tappable equity down 5% over the past two months, suggesting a sizeable reduction is likely in Q3, which would mark the first quarterly decline in three years.

The Black Knight report notes that some of the most significant declines in tappable equity are occurring in equity-rich West Coast markets.

“From April through July, San Jose lost 20% of its tappable equity,” Black Knight Data & Analytics President Ben Graboske said. “Seattle followed, shedding 18% of tappable equity over that same three-month span.

“Likewise, San Diego (-14%), San Francisco (-14%) and Los Angeles (-10%) have all seen double-digit declines since April.”

There is still a lot of equity to be tapped into. The national numbers hit $11.5 trillion in the second quarter of this year. HELOCs and cash-out refinances are thriving in this market.

New and existing home sales are expected to sell 22% and 17% respectively through the rest of this year. It’s not all bad news though, home prices did hit a high this year. Average home prices were up significantly in the second quarter of this year, to $525,000, compared with $440,600 for the same period in 2021, according to the Federal Reserve Bank of St. Louis. The median sales prices in the second quarter of this year was $440,300, compared with $382,600 for the second quarter of last year, the report shows.

Higher mortgage rates are prompting buyers to stay on the sidelines but those current homeowners have a lot of opportunity today. To help curb the high mortgage rates, the Federal Reserve says that it is going to continue aggressively hiking their Fed Funds Rate. They raised it by 75 basis points twice this year already, we should expect another major hike like that in September.

When the Federal Reserve raises their Fed Funds Rate, mortgage rates tend to fall as well as inflation tends to get back under control. Talk to us today about your options. There are many routes home owners and home buyers can take right now that will greatly benefit you in the future.