Homeowner Equity Grew In Q3 Despite Cooling Market

Even as the housing market is rapidly cooling, homeowner equity rose again in Q3, according to ATTOM Data’s Q3 2022 Home Equity & Underwater Report.

The report found that 48.5% of mortgaged residential properties were considered equity-rich, up from 48.1% in Q2 and from 39.5% a year earlier.

This is a slower increase than previous quarters, but still the 10th quarter of gains.

“Even though home price appreciation has slowed down dramatically in recent months, homeowners have continued to build equity,” said Rick Sharga, executive vice president of market intelligence at ATTOM.

At least half of mortgagees in twenty states are now equity-rich, compared to only seven states at the same time last year.

In total, 94.3% of all mortgage holders have at least some equity in their homes.

At the same time, seriously underwater properties accounted for just 2.9% of all mortgages. This is the same as Q1 2022, but down from 3.4% a year ago.

Home equity lending has gained popularity as homeowners look for extra cash in the face of high inflation and a coming recession.

The number of new home equity lines of credit increased by 43% YOY.

“We’re seeing a pretty strong demand pattern for home equity products,” Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans, told NextAdvisor.

“Consumers are looking for affordable ways to tap into their home without jeopardizing their primary mortgage.”

HELOC lending rates have stayed below mortgage rates, though they may soon rise. Analysts predict that the Federal Reserve’s continued aggressive fight against inflation will result in HELOC rates moving up.

“There’s some conversation that a bit of the rate hike is already built in – maybe 30 or 40 basis points. I don’t think we’ll see a jump overnight but I can see some of the rates for a HELOC or home equity loan going to 6.5% or 7%,” Jamie Hopkins, managing partner of wealth solutions at Carson Group, told Bankrate.

Jacob Channel, senior economist at LendingTree, seconded that opinion.

“I think that 7.5% is a reasonable prediction, with the caveat that it can vary pretty significantly from borrower to borrower,” Channel said.

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