This past year has been one of significant home price growth, to say the least. But it has also occurred in a market in which the word “unprecedented” has likely been used more over that same period than perhaps ever in history. Nevertheless, that growth has brought the levels of equity available to American homeowners with mortgages to…well, unprecedented levels.

Recently fine-tuned and recalibrated to reflect the realities of today’s real estate market, the Black Knight Home Price Index showed that through the end of Q4 2020, home prices grew at a 10.8% annual rate. In and of itself, that is of note – we haven’t seen home prices rise this quickly since back in late 2005. The effect this has had on tappable equity – the amount available for homeowners to access before hitting a maximum 80% combined LTV – is somewhat staggering.

At year’s end, some 46 million homeowners held a total $7.3 trillion in tappable equity, the largest amount ever recorded and the largest the population’s ever been as well. That’s an increase of more than $1.1 trillion (+18%) since the end of 2019, the largest percentage gain since 2013 and – you guessed it – the largest dollar value gain in history, to boot. All in all, it works out to roughly $158,000 on average per homeowner with tappable equity, up nearly $19,000 from the end of 2019.

As the saying goes, a rising tide lifts all boats. The same historic home price growth that has been building American homeowners’ level of available equity has also been steadily chipping away at the number of borrowers who owe more on their mortgages than their homes are worth. The share of so-called underwater borrowers has crept down to just 1.45% – about 772,000.

Now we move into what’s traditionally been the spring homebuying season with interest rates – despite recent hikes – still extremely low by historical standards. With available inventory as tight as it’s been, it remains possible, if not likely, that further home price gains through the spring will drive tappable equity levels even higher in Q2 and further decrease the underwater population. But of course, all of that remains to be seen and, as we’ve all learned over the past year, anything can happen between now and then. We’ll keep watching regardless.

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