Homeowners gained a record amount of home equity last year as housing prices surged, allowing them to access more wealth to fund everything from house improvements to debt consolidation.
Tappable home equity jumped by $2.6 trillion to a record total of $9.9 trillion in 2021, according to new figures from mortgage analytics firm Black Knight. That’s the largest single-year increase and more than double the $1.1 trillion growth set in 2020.
The gains put homeowners on even firmer ground financially — providing them $185,000 on average to tap while retaining at least a 20% stake in their homes.
“Home price appreciation over the course of 2021 was unlike anything that’s come before, and the incredible growth we’ve seen in homeowner equity is testament to that fact,” said Ben Graboske, Black Knight’s data and analytics president, in a statement. “And while we saw the rate of home price growth begin to slow beginning in July 2021, that trend has since reversed … making even further gains likely, at least in the near term.”
Homeowners added $48,000 in equity over last year, according to Black Knight. Collectively, mortgage holders owe just 45% of their home’s value — the lowest total leverage on record, according to the analytics firm.
Some homeowners have already taken advantage of those gains.
In the third quarter — the most recent origination data available from Black Knight — homeowners tapped their equity at the highest rate in more than 14 years, with cash-outs making up 54% of all refinances. For John Stearns, 75% of his recent refinances took cash out, the senior mortgage banker with American Fidelity Mortgage in Wisconsin told Yahoo Money.
“One guy got $80,000 cash-out, which is 15% of what his house in Florida appraised at. The couple today got $13,000 cash-out, which is 8% of what their house appraised at,” Stearns said. “The other one was $30,000 cash-out, 10% of what the house appraised for.”
“Although pulling cash out may not be as attractive as it was a few weeks ago, it’s still something that borrowers will access because of the need,” Ruben said.
Rising home prices also continue to provide a growing cushion.
“At a time of the year that typically sees little to no price movement – home prices increased by 0.84%" in December, the largest price growth on record for the month, Graboske said. “That same daily data suggests the trend continued in January – even as interest rates began to spike.”
Janna is the personal finance editor for Yahoo Money. Follow her on Twitter @JannaHerron.