Borrowers have a record $11 trillion in tappable equity

Escalating home prices delivered a record gain of $1.2 trillion in tappable equity to borrowers in the first quarter of the year, Black Knight reports.

Mortgage holders are enjoying a total of $11 trillion in tappable equity, or $207K per borrower, also the highest on record, according to the Black Knight Mortgage Monitor report for April. Home prices were up 19.9% in April, a slight decrease from March’s 20.4% annual gain.

“Depending upon where you stand, this could be the best or worst of all possible markets,” said Ben Graboske, Black Knight Data and Analytics president, in a statement.

Prospective homebuyers in April faced the worst affordability in nearly 16 years. In May, it took 33.7% of the median income, or $1,958, to make a monthly principal and interest payment on an average-priced home with a 5.25% 30-year mortgage rate, Black Knight said. That figure is a hair below 34.1% share in June 2006, the height of that era’s housing market.

Mortgage rates exceeding 5.35% or home prices rising another 1.1% could drive affordability to a new record-low, according to the report. Rates, however, have flattened in the past week amid financial market concerns over slowing economic growth. Home price deceleration in April was likely a reflection of modest rate increases at the beginning of this year, Black Knight said, and the recent 5% threshold crossing could reflect on upcoming sales indexes.

Refinances continued their slide in April and were down 54% over the past 12 months, led by an 80% annual freefall in rate/term refis, the report said. Cash-out refis made 75% of all refis in Q1, up from 36% last April. In total, mortgage holders withdrew more than $75 billion in equity via cash-out refis, the highest such volume in 15 years, according to Black Knight.

Borrowers in dire straits also improved their position as the national delinquency rate fell 1.3% to a record-low 2.8% in April, the report said. Delinquencies 30-to-60 days behind on payments increased 8% but serious delinquencies 90 days or more past due fell 7.8%.

The number of forbearances fell by nearly 37,000 in April but as of mid May 645,000, or 1.2% of all mortgages remained in active forbearance, according to Black Knight. The combined unpaid balance between loans in forbearance totaled $115 billion. 

Prepayment activity also fell 19.1% to a 3-year low in April, Black Knight reported. Total prepayment activity remains 61.8% down from a year ago as rates continue to rise.