As we move into the winter months, with Christmas less than two weeks away, home price growth has begun to slow, with the Black Knight Home Price Index showing deceleration in the rate of annual appreciation in each of the past three months. Its daily home sales tracking data showed that median sales price growth among single family residences slowed to 11 percent year-over-year. Despite the deceleration, Orion’s brokers know that appreciation remains robust as supply shortages continue to put upward pressure on prices.

The average home value increased 0.6 percent in October, which was the smallest increase in 10 months, but still nearly three times the 10-year average rate for the month. The market currently faces a 54 percent deficit in properties for sale compared with 2017-2019 averages. If meaningful in flow isn’t seen from the post-forbearance population, it could signal a longer-term recovery for inventory levels across the country, which could mean elevated home price growth rates as tightening affordability butts up against a continued shortage of supply. It now takes22.4 percent of the median household income to make the monthly mortgage payment on a median-priced home, up from 18.1 percent at the beginning of 2021.

Brokers know that the same price growth has also been adding to American mortgage holders’ already record levels of “tappable equity”: the amount available for homeowners to access while retaining at least 20 percent equity in their homes. Tappable equity surged $254 billion in Q3 2021 alone to reach a new record-high aggregate total of $9.4 trillion. The aggregate total of $9.4 trillion is up 32 percent from the same time last year and is nearly 90 percent higher than the pre-Great Recession peak in 2006.

As priceshave surged over the past 18 months, the average mortgage-holder’s equity stake has risen by $53k. That works out to nearly $178k available in tappable equity to the average homeowner with a mortgage before hitting a maximum combined loan-to-value ratio of 80 percent.

Brokers are marketing to that population. Indeed, borrowers pulled equity from their homes via cash-out refis in Q3 at the highest rate in more than 14 years. Before advising your clients and going too far down the “using your home as an ATM” road, there are some important points to consider. The more than $70 billion in equity tapped via cash-out refis in Q3 is equivalent to just 0.8 percent of available equity entering the quarter, 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 stronger today as well, with the average credit scores ofcash-out refinance borrowers more than 50 points higher than during that period, and resulting LTVs are much lower. In fact, the average borrower’s mortgage debt is now just 45.2 percent of their home’s value! Be sure to talk to your Orion AE about our refinancing programs.

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