U.S. homeowners today are getting richer by the minute, but they are less likely to cash in on their newfound wealth than during previous housing booms. As home values rise, home equity lines of credit, often used to tap home equity, are flatlining, and the overall amount of money people are taking out of their homes is shrinking. The collective amount of so-called tappable equity, which is the appraised value of a home minus the 20 percent most lenders require borrowers to keep as a safety net, grew by 7 percent in the first quarter of this year compared with the previous quarter, according to Black Knight, a mortgage software and analytics company. That is the largest single-quarter growth since the company began tracking it in 2005. It is up 16.5 percent compared with a year ago.

A homeowner trims her yard in the Kenwood Park neighborhood of Bethesda, Md. Benjamin C. Tankersley | For The Washington Post | Getty Images

Homeowners now have a collective $5.8 trillion in tappable equity, the highest volume ever recorded and 16 percent above the last home price peak in 2006. The average homeowner with a mortgage gained $14,700 in tappable equity over the past year and has $113,900 available to draw. This is the amount over and above 20 percent of the value of the average home.

Variable interest rate fears

But HELOCs, on the other hand, have variable interest rates, unlike the 30-year fixed primary mortgage, so the rate on a HELOC can change. A HELOC is therefore more risky because the Federal Reserve has been raising rates steadily, and HELOCs follow that. “Who wants uncertainty when it comes to monthly finances,” said Ben Graboske, executive vice president of Black Knight’s Data & Analytics division. “I think a lot of Americans look at, what are my payments? What is my income coming in and what are my payments going out? They want certainty that they can cover their costs and not worry about it.” Nearly 80 percent of tappable equity is held by homeowners whose current mortgage interest rate is below 4.5 percent, and 60 percent of it is held by borrowers whose rate is below 4 percent. The average rate on the 30-year fixed today is around 4.8 percent, according to the Mortgage Bankers Association. Still, those who are tapping equity are doing it more through cash-out refinances than HELOCs. Originations for HELOCs are flat, and the amount of equity being withdrawn on HELOCs that are originated is at a two-year low. More borrowers are doing cash-out refinances, even at a higher interest rate, because they are leery of the variable rates on HELOCs. But overall, just 1.17 percent of available equity was tapped in the first quarter of this year, the lowest amount in four years. Why? They may not know just how rich they are. “I think the typical American doesn't have that level of awareness, they're not probably studying the numbers,” added Graboske.

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