$10 Trillion in Home Equity and Lowest Delinquency for Homeowners

Homeowners have now reached $10 trillion in home equity, and home loan delinquencies dropped by 2.3% year-over-year from November 2020. These are definite indicators that Americans are recovering from the economic effect that the COVID-19 pandemic had on finance. 

The study conducted by the data, analytics, and platform provider CoreLogic, shows that mortgages had the lowest delinquency rates since the start of the pandemic, with just 3.6% of home loans being past due for 30 days and more.

Furthermore, the study also reports that the high home value and low interest rates contributed to low foreclosure numbers. By borrowing against the equity, most homeowners managed to avoid falling behind on mortgage payments, despite the hardships and financial challenges caused by the COVID-19 pandemic.

“Income growth has helped to reduce past-due rates, and home equity build-up has reduced the likelihood of a distressed sale for families that experience financial challenges,” said Dr. Frank Nothaft, CoreLogic's chief economist. Another contributing factor was the rising employment numbers in 2021, which helped rebuild income. 

The states with the lowest delinquency rates were North Dakota with 1.2%, Minnesota (1.3%), Wisconsin (1.5%), Illinois (1.8%), and Utah with 2.2%.

According to data from Black Knight’s Originations Market Monitor report, cash-out refinance rate locks grew by 9.2% between December 2021 and January 2022. Furthermore, average loans for refinancing and purchasing increased by $6,400 and are on average $374,000. 

“With some $10 trillion in homeowner tappable equity in the market, it makes sense that we’d see cash-out refinance locks on the rise,” said Black Knight Secondary Marketing Technologies’ president, Scott Happ. 

“Mortgage rates are still about 1% lower compared to 2011. If they bought their home ten years ago, their home is worth nearly $200,000 more,” said the National Association of Realtors’ senior economist, Nadia Evangelou.

Many homeowners with high equity that haven’t refinanced or bought a property recently could benefit from refinancing their mortgage. According to Black Knight’s earlier report, around 5.9 million candidates could save money by refinancing. More than a million US homeowners can lower their monthly fees by $400, while over 660,000 can save more than $500.

Refinancing isn’t an option for everyone, though, as suitable candidates need to have an appropriate credit score, equity, and a sound financial foundation. This is especially true if a person has already refinanced below current rates.