Homeowners throughout the U.S. are benefitting from recent home price appreciation by way of swelling home equity values. A Sept. 10 report from the data firm Black Knight estimated that the total value of “tappable” equity for the entire U.S. residential market had surpassed $6 trillion as of the end of Q2 2018. Since home equity often represents the largest single source of wealth in the average American household, and because a lack of home equity played a significant role in the housing crisis, this was generally welcome news.
“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,” Black Knight Data & Analytics Executive Vice President Ben Graboske explained.
Black Knight defines “tappable” home equity as the equity available for the purposes of a home equity line of credit (HELOC) or a cash-out refinance — typically no more than 80 percent of which can be borrowed against for a cash loan. Therefore, the true value of total home equity in the U.S. is much higher — the Federal Reserve estimated that the figure was nearly $15 trillion in Q1 2018, an all-time high.
Separate analyses of home equity have shown that this key determinant of net worth has grown even among historically disadvantaged groups. A report by Redfin found that predominantly minority neighborhoods witnessed the largest percentage gain in home equity between 2012 (when home equity bottomed out after the recession) and 2018. According to Redfin, communities with more nonwhite homeowners saw average home equity grow by 265 percent in those six years, from $69,000 in 2012 to $254,000 today.
“Home prices over the last six years rose most steeply in minority communities, and unlike in past booms when Americans just borrowed more and more money, these price gains led to real increases in wealth for homeowners of color,” said Redfin CEO Glenn Kelman in the report.
However, when measured in dollars rather than as a percent, majority-white communities gained the most equity in the study’s timeframe — $221,000 on average compared to the average $185,000 increase in equity for minority areas. This is because home equity in white communities didn’t fall as low in 2012 as it did in minority communities.
Nationwide, the average household gained $194,000 in home equity between 2012 and 2018, a 197 percent increase. In the nation’s 16 largest metro areas, the gap between white and nonwhite equity values grew in all but three cities. Miami was one of them: Homes in minority areas of Miami gained $154,000 of equity on average, while mostly white communities gained $148,000. Boston was the only city where the equity gap was unchanged, while Riverside, California, was the only city where minority area equity gains in dollars outpaced that of white communities.