Morning Briefing: 38 million mortgage borrowers have at least 20 per cent equity

by Steve Randall12 Jul 2016
38 million mortgage borrowers have at least 20 per cent equity
The number of US mortgage borrowers with at least 20 per cent equity has reached 38 million while those who are underwater is down to 2.8 million, a drop of 13 per cent from a year ago.

Figures from mortgage lender Black Knight Financial, based on data from the end of May 2016, also reveal that those with at least 20 per cent equity have an average $116,000.

“As we approach the 10-year anniversary of the pre-crisis peak in U.S. housing prices, we’re just under 3 per cent off that June 2006 peak nationally, and 23 states have already passed their 2006 peaks,” said Black Knight Data & Analytics Executive Vice President Ben Graboske. “The result is that equity levels are rising nationwide for the most part. In Q1 2016, 425,000 borrowers who had been underwater on their mortgages regained equity, bringing the national negative equity rate down to just 5.6 per cent.”

Black Knight’s data also shows that cash-out refinances made up 42 per cent of all refinance transactions in Q1 2016 with $20 billion in equity extracted.
Low income earners spend higher percentage on mortgage payments
Monthly mortgage payments take larger slice of the earnings of low-income households according to analysis from Zillow. Those on low incomes spend an average 23 per cent of their earnings on mortgage payments while high earners spend just 11.5 per cent.

"Housing affordability is a different story for low-income Americans than for median and high-earning people," said Zillow Chief Economist Dr. Svenja Gudell. "They are spending much more of their income on housing, even when they buy the least expensive homes. On top of that, we know that the least expensive homes are gaining value the fastest and are the most scarce, making it hard to find a home to buy even if you can afford one. From a high level view, mortgage affordability looks pretty good across most of the country, but it's not good for everyone."

The affordability issue is far greater in some markets; low income earners in Los Angeles for example spend 76.1 per cent on housing while high earners spend 27.5 per cent. By contrast, in Detroit low income earners spend 10.3 per cent while high earners spend 9 per cent.

 The data is based on the assumption that low income earners buy less expensive homes, median earners buy median price homes and high earners buy homes in the top third of the market.
20 year-old buys Hollywood Hills home for $6.5 million
While young millennials may be forced to wait before buying their own home, some have the means to jump straight in.

Reality star Kendall Jenner has already moved from her LA condo $1.4 million ‘starter home’ to a $6.5 million mansion in the Hollywood Hills at the tender age of 20.

The 6-bedroom, 5-bathroom home was famously gift-wrapped by Jimmy Kimmel who was pranking previous owners John Krasinski and Emily Blunt. The couple listed the home with Sotheby’s International’s Catherine Marcus for $8 million.


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