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Americans Aren't Touching $6 Trillion in Home Equity

Americans Aren't Touching $6 Trillion in Home Equity
(Dollar Photo Club)

By    |   Monday, 17 September 2018 06:30 AM

Americans reportedly are sitting on a record amount of untapped home equity as household income and wealth continue to climb under President Donald Trump.

U.S. homeowners were sitting on more than $6 trillion worth of collective tappable home equity at the end of June, according to data provider Black Knight. Tappable equity is the amount most lenders will allow borrowers to cash out, while still keeping 20 percent equity in the home, CNBC explained.

“As the second quarter came to a close, the total amount of tappable equity available to homeowners with mortgages surpassed the $6 trillion mark for the first time in history,” said Ben Graboske, executive vice president of Black Knight’s Data & Analytics division.

“There is now $636 billion more tappable equity available than at the start of 2018, and nearly three times as much compared to the bottom of the market in 2012.”

About 44 million homeowners with mortgages can now access cash through cash-out refinances or home equity lines of credit (HELOCs). That averages to about $138,000 per person, CNBC explained.

However, homeowners appear to be reluctant to grab the cash and run. Homeowners withdrew about $65 billion in home equity in the second quarter of this year. Homeowners have withdrawn just 1.13 percent of tappable equity, the lowest share since the start of 2014, CNBC reported.

Lenders are eager to show the money to homeowners through home equity loans, home equity lines of credit and cash-out refinancing.

"The rates are often lower than other kinds of borrowing, and the interest may still be deductible, despite last year's tax reform changes. But you can lose your home to foreclosure if you can't pay back the loan, which is why financial planners generally frown on using equity for luxuries, investing or consolidating credit card debt," NerdWallet's Liz Weston explained.

Many planners point to the foreclosure crisis that started a decade ago as an example of what can go wrong when people binge on home equity debt, Weston reported.

"Having equity in your home is a huge financial advantage that can provide for significant flexibility, security and peace of mind," Howard Pressman, a certified financial planner in in Vienna, Va., told Nerdwallet "It is not an ATM that can be used to supplement your lifestyle."

Meanwhile, U.S. households added $1 trillion to their wealth in the first three months of this year, boosted by rising stock prices and home values, the Federal Reserve said in June.

U.S. household wealth reached $100.8 trillion in the January-March period, Reuters explained.

The rising value of their investments has now boosted their net worth by over $6 trillion compared to the first quarter of 2017, a period that largely overlaps with the first year of the Trump administration.

Wealth has been rising since the United States emerged from the 2007-09 financial crisis and the U.S. labor market had been steadily improving for several years before Trump took office on Jan. 20, 2017.

To be sure, the median U.S. household income rose for a third straight year in 2017 and the poverty rate declined further, government data showed on Wednesday.

The Census Bureau said in its Income, Poverty and Health Insurance Coverage and Supplemental Poverty Measure report that median household income increased 1.8 percent to $61,400 last year.

It said about 28.5 million residents did not have health insurance in 2017, not statistically different from the previous year. The report also showed the poverty rate — the percentage of people living in poverty — fell to 12.3 percent last year from 12.7 percent in 2016, Reuters explained.

Americans continue to see their lot improve as the economy builds on the progress made since it emerged from the recession in mid-2009, accompanied by healthy hiring and an unemployment rate near the lowest in almost five decades. At the same time, 10 years after the financial crisis marked by the collapse of Lehman Brothers Holdings Inc., the large number of poor people and persistent inequality are a reminder that there’s more work to be done.

The report could still be welcome news for Republicans ahead of the congressional midterm elections in November, and President Donald Trump’s tax cuts implemented in 2018 may further boost growth, though his trade policy remains a risk for the economy, creating uncertainty for businesses and for employment.

Even with the better picture on overall incomes, disparities between groups persisted last year. Median earnings for men rose 3 percent to $44,408, while women earned $31,610, just 0.2 percent above 2016. Racial gaps widened, with the median income for black households down 0.2 percent to $40,258, while non-Hispanic white household income rose 2.6 percent to $68,145. Hispanic households fared better, with a 3.7 percent jump to $50,486.

Material from Bloomberg, Reuters and the Associated Press were used in this report.

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Americans reportedly are sitting on a record amount of untapped home equity as household income and wealth continue to climb under President Donald Trump.
americans, home, equity, 6 trillion, wealth
Monday, 17 September 2018 06:30 AM
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