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October 2021 Mortgage Monitor

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

  • Tappable equity – the amount available for homeowners to access while retaining at least 20% equity in their homes – has risen by 32% over the past year, an increase of $2.3 trillion since Q3 2020
  • Skyrocketing home values over the past 18 months have increased the average mortgage holder’s equity stake by $53,000, for an average of just under $178,000 in available equity per homeowner
  • Rising equity stakes have pushed the average homeowner’s combined mortgage debt down to just 45.2% of their home’s value, the lowest average combined loan-to-value (CLTV) ratio on record
  • While the rate of home price growth is slowing – decelerating in each of the past three months – appreciation remains robust, with supply shortages putting continued upward pressure on prices
  • The recent improvement in for-sale inventory has begun to stall out, with inventory shortages holding firm in each of the past three months
  • With home prices still climbing alongside rising interest rates, the monthly principal and interest payment required to purchase the average-priced home has increased by 24% since the start of the year
  • It now takes 22.4% of the median household income to make the average monthly mortgage payment, up from 18.1% at the beginning of 2021 and the most since late 2018 when 30-year rates were near 5%

JACKSONVILLE, Fla. – Dec. 6, 2021 – Today, the Data & Analytics division of ICE 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 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 October 2021 Mortgage Monitor Report.

About 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.

About Mortgage Monitor

ICE 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 ICE Home Price Index and ICE Valuation 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.

ICE’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.icemortgagetechnology.com/resources/data-reports

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges – including the New York Stock Exchange – and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines and automates industries to connect our customers to opportunity.

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