How Much Equity is Available?

Filed under: Market Comentary

There was a headline today that jumped out at me – it speaks to what is really happening in the housing market right now. People are wondering if the current trends are sustainable and whether we have a big crash coming. The headline said: “9.1 Trillion Dollars in Tappable Equity in Residential Properties.”

That number is up by 27% year-over-year. It’s easy to be cynical about that number. Of course, the reports will be high if numbers are overly-inflated. How quickly can it all disappear? It’s a reasonable question to be asking.

Current Situation in the Real Estate Market

Who knows, the cynics might end up being right about our current situation. But what I will say: that much equity and a huge imbalance that we are seeing in supply and demand doesn’t indicate any problems on the horizon. Inventory is still under 30-days, which is drastically low since 4- 6 months is considered a solid market.

Sellers were feeling spoiled by getting 10 – 20 offers. Now, things are starting to slow down and you might get 2 – 5 offers on the first or second week. Now sellers are starting to get antsy about that. But remember that we’ve been spoiled recently – and the reality is that a few offers in the first week is a home run in most markets.

It’s Different Than 2008

Think about the imbalance in supply and demand. Even if these delinquencies start to pick up, people have plenty of equity to sell the property. Even including the forbearances, delinquencies continue to be at historic lows. I don’t see the catalyst for anything that will take this market down unexpectedly. I’m a cynical thinker in this stuff, and I would love to hear other viewpoints about this topic.

As long as there is that much equity in the market, it creates a very different situation than we were facing in 2008. I continue making the comparison to the last downturn – at that time the average equity in most people’s homes was really low – even close to zero in some cases. Where we are now is much better than in our current situation.

If you are thinking about buying or you want to maximize equity through a refinance, then talk to me any time. I’m here to help with unique financing solutions for your family.

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