Harvard: Americans have more equity, less mortgage debt

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Americans now have nearly as much home equity as they did when levels peaked before the housing crisis, according to a recent study on the state of the nation’s housing market from Harvard’s Joint Center for Housing Studies.

Aggregate home equity jumped from $7 trillion in 2011 to $15.5 trillion in 2018, according to the study, a fact attributable to rising home prices coupled with only modest increases in mortgage debt.

“With this increase, home equity levels are approaching the pre-crisis peak of $17 trillion while aggregate mortgage debt remains closer to the post-crisis low,” the study stated.

In 2016, the median amount of homeowner equity was $100,000, down from $121,6000 in 2007, the report revealed.

In 2016, 86% of homeowners had at least 20% of their home’s value in equity, while 61% had at least 50%.

But while this sizable growth in home equity creates the potential for many to cash out some of their housing wealth, there is little evidence of risky equity extractions, the study stated.

Those who are tapping into their equity tend to be older homeowners with strong credit, the center noted, with the main reason cited as the need to pay down higher-cost debt.

Other top reasons for tapping equity were to finance home repairs and improvements, investing in a business, making a large purchase, or paying for college.

“Although the aggregate volume of cash-out refinances and home equity loans and lines of credit has risen slightly in recent years, withdrawals remain near their 2000 level and well below the peak during the housing boom,” the study said.

 

 

 

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