A mortgage industry consulting firm, STRATMOR, suggests in a published column that lenders should contemplate adding more home equity lending due to factors such as the housing market instability, pandemic-induced home value increase, and consumer outlook.
Based on CoreLogic’s statistics, around 63% of U.S. properties with mortgages have experienced a total boost of $1 trillion in home equity levels as of Q4 2021. Furthermore, Black Knight’s data demonstrates that the amount of tappable home equity has grown by $3.4 trillion within the past three years.
The article highlights that towards the end of 2022, this pattern shifted to some degree. With a gradual, moderate decrease in home value growth in many regions, the trends in home equity similarly subsided. During the fourth quarter of 2022, the typical borrower gained approximately $14,300 in equity compared to the previous year, a stark contrast to the $63,100 increase observed in the initial quarter of 2022. Nevertheless, the level of usable home equity continues to remain substantial.
Furthermore, an increasing number of lenders are embracing home equity lending. As per a STRATMOR survey in 2022, 92% of the participating lenders acknowledged that home equity products satisfy the needs of borrowers, and 85% regarded them as crucial for building customer relationships.
Although the article doesn’t mention reverse mortgages, it’s worth noting that the home equity levels held by seniors have been increasing in recent years.
The National Reverse Mortgage Lenders Association (NRMLA) and RiskSpan, a data analytics company, have developed the Reverse Mortgage Market Index (RMMI) which reveals that senior-owned housing wealth has exceeded $9 trillion as of July 2021, and for the first time surpassed $8 trillion in April 2021. The RMMI data indicates that this collective wealth had already surpassed $7 trillion in March 2019.
The latest Reverse Mortgage Market Index (RMMI) publication states that the senior-owned home equity reduced in Q4 2022, which is the first decline since 2011. However, despite the decline, the total figure still settled at $12.39 trillion. It’s worth noting that the last time senior-owned home equity fell, the collective figure was slightly over $3 trillion.
