MANASSAS, VA — U.S. homeowners gained a record-breaking $1.2 trillion in “tappable home equity,” a new high-water mark resulting largely from the impact of the COVID-19 pandemic, according to a new report from Strong Home Mortgage LLC, a major consumer-direct mortgage lender.
Tappable equity is the borrowing limit that is determined from the net of a home’s market value and its mortgage balance. It allows homeowners to tap an existing pool of equity and convert it to cash through financial tools like a home equity line of credit (HELOC), home equity loan, or cash-out refinancing.
According to Strong Home Mortgage LLC, the current level of $207,000 in median tappable equity “is good news for U.S. households,” and signals an acceleration in the current trend line. In March 2022, the mortgage lender notes, the level of median tappable equity was $185,000, 21% higher than the $153,000 in August 2021.
“Homeowners view tappable equity as an efficient means to boost renovation budgets and potentially further increase home values,” said Strong Home Mortgage president Mike Peoples. “Remodeling can then capitalize on remote work, multi-generational living and other developing opportunities.”
Strong Home Mortgage sees “exponential growth ahead for home equity solutions,” Peoples observed, a trend that he predicted would offset interest-rate hikes, inflation, stock market declines and other economic reversals.
In other remodeling market news:
- An increasing number of people are remodeling their home in an effort to raise the value of the dwelling, according to a new nationwide homeownership survey. According to the survey, conducted in late March by Regions Next Step, nearly half (48%) of more than 1,000 surveyed U.S. homeowners say they are likely to make updates to their current home in an effort to increase its value in the coming year. That figure is up 7% compared to the same time last year, according to Regions Next Step, the financial education arm of Birmingham, AL-based Regions Bank.
- Buyers of new and existing homes spend thousands of dollars more on remodeling and furnishings in the first year after a purchase compared to non-moving homeowners, according to estimates by the National Association of Home Builders.
- NAHB’s latest estimates, based on pre-pandemic data from the Bureau of Labor Statistics, reveal that during the first year after purchase, a typical buyer of a newly built single-family detached home spends on average $9,250 more than a similar non-moving homeowner. Likewise, a buyer of an existing single-family detached home tends to spend about $5,240 more on remodeling, furnishings and appliances than a similar non-moving homeowner, according to the Washington, DC-based NAHB, which concluded that “home buying generates a wave of additional spending and activity not accounted for in the purchase price of the home alone.”
- Homeowners are still undertaking residential remodeling projects, but market headwinds – including supply chain delays, inflation and skilled labor shortages – are apparently resulting in the first signs of a slowdown in activity, a market research study has revealed.
According to the latest in a monthly series of “Home Improvement Trackers” conducted by The Farnsworth Group, its most recent survey of homeowners and professional remodeling contractors revealed that 68% of homeowners planned to start a project in the coming weeks, compared to 71% last month, while one in four have purchases less than originally planned due to market pressures, particularly due to product availability and cost.
“Since last summer, we now see a slow but long-term trend that shows fewer homeowners see this as a good time to start a remodeling project,” said The Farnsworth Group, an Indianapolis-based research firm specializing in the home improvement market.
“Desire is still high, but could continue dropping,” the researchers added.