Homeowners gained $2.6 trillion in tappable equity in 2021, up by 35% year-over-year for an aggregate total of almost $10 trillion, Black Knight’s December 2021 Mortgage Monitor reported.
In just Q4 2021 alone, tappable equity rose by nearly half a billion dollars, resulting in the lowest total market leverage on record.
The $2.6 trillion gain was the largest annual increase ever, more than double 2020’s record high of $1.1 trillion. The average homeowner has gained $48,000, for a total of $185,000 in available equity.
“Home price appreciation over the course of 2021 was unlike anything that’s come before, and the incredible growth we’ve seen in homeowner equity is testament to that fact,” said Black Knight Data & Analytics President Ben Graboske.
“The aggregate total of $9.9 trillion represents an astounding 35% annual growth rate – which works out to an increase of $2.6 trillion in tappable equity in a single year. That’s $185,000 available to the average mortgage holder before hitting a maximum combined loan-to-value ratio of 80%. In fact, it’s driven total market leverage down below 45% for the first time on record.”
Home price growth has been slowing since mid-summer, but changed course in the last part of 2021 as supply shortages pushed prices higher.
The number of new homes on the market has run a deficit for 30 consecutive months. The U.S. housing market is currently short between 500,000-750,000 active listings when compared to 2017-2019 December inventory levels.
Black Knight’s Home Price Index and its Collateral Analytics daily tacking data showed home prices increasing by 0.84% in December, the largest December price growth on record.
“That same daily data suggests the trend continued in January – even as interest rates began to spike,” Graboske said.
“It now takes 25.8% of the median household income to purchase the average-priced home with 20% down and a 30-year mortgage, up from the 22.4% required at the end of Q3 2021. Interest rate jumps in recent weeks have pushed us – and quite quickly – above the long-term, pre-Great Recession average payment-to-income ratio of 25%, straight to the worst affordability levels since 2008.”