Maximize returns.

Get Started For Free

Home equity hits record levels as we enter 2022

Home equity hits record levels as we enter 2022
by Brad Cartier, posted in Newsletter

As we close off 2021, everyone is wondering what will happen to the housing market in the coming year. Brad Finkelstein of National Mortgage News (subscription required) reports on a Standard & Poor’s report stating that home appreciation is slowing and is not an indication of an imminent bubble bursting. In fact, the report calls for home price growth to normalize rather than suddenly correct.

“There are similarities between the current pattern of home price appreciation and the 2004–2006 experience…However, differences in the fundamental drivers of home price appreciation then and now suggest the current environment is a healthier one than the housing bubble that preceded the Great Financial Crisis.”

Indeed, home equity levels are at historical levels. According to Black Knight’s latest Mortgage Monitor report:

  • The amount of equity available for homeowners rose by 32% year-over-year in October, an increase of $2.3 trillion since Q3 2020.
  • Home values over the past 18 months have increased the average borrower’s equity stake by $53,000.
  • Rising equity stakes have pushed mortgage debt down to just 45.2% of the average home’s value

For the last statistics, this is the lowest average combined loan-to-value (CLTV) ratio on record.

Year over year change in tappable equity - Black Knight

Source: Black Knight (Dec. 2021)

With interest rates still near historic lows, you may be thinking about buying or refinancing a rental property to tap into some equity as well. Here are this week’s mortgage rates.

A recent study from Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA) also indicates that “The net worth of the typical household — the family in the middle of the distribution, richer than half and poorer than half — increased by 17.6 percent, from $103,000 to $127,000, the highest it has been since 2007.”


There is a strong supply and demand imbalance in housing. Too much demand is spurring higher asset prices, pushing home values to record levels and creating affordability issues for many families. This has led to many jurisdictions looking into upzoning—allowing more density in certain areas to allow for more housing supply. Sam Spiegelman of the Los Angeles Daily News reports on this issue in California:

“Upzoning some of these single-family zones to multi-family use would help ease the shortage, as more residential units become available with the construction of new duplexes and triplexes, with the benefit of giving individuals more freedom over what they can do with their own land. In a similar vein, it would allow a freer market to decide which neighborhoods remain single-family and which begin to reflect a growing preference for an urban-suburban synthesis.”

David Wagner of LAist comments on a new Stessa report that shows out of any state, California added the least amount of housing units relative to new jobs. And, single-family home construction is at record highs, making densification and creating multi-family dwellings more challenging.

The single family housing unit share reached a 10 year high - Stessa

Source: Stessa (Dec. 2021)

Liam Dillon of the Los Angeles Times recently reported on a poll that shows voter support in that county for upzoning initiatives. “Countywide, 55% of voters support Senate Bill 9, which lets property owners construct duplexes, and in some cases fourplexes, in most single-family-home neighborhoods statewide. By contrast, 27% were against the law while 18% were undecided.”

Similarly, San Jose is going further than Senate Bill 9, with Maggie Angst of The Mercury News reporting that “The city’s [new] proposal would combine SB 9’s provisions with those of a zoning concept it previously considered known as “opportunity housing, which are similar but also would have allowed increased density in historic neighborhoods and areas that allow duplexes.”

New construction

In some reprieve for the supply starved housing market, new construction jobs are slowly returning to the industry which will help ease labor shortages, according to Housing Wire.

“The construction sector added a total of 31,000 jobs in November, on par with the two prior months. Specialty contractors showed the largest gains with an increase of 13,000 jobs, while persons employed in construction of buildings, and civil and heavy engineering rose by 10,000 and 8,000 jobs, respectively.”

The build-to-rent industry also had a good quarter according to the National Association of Homebuilders (NAHB). Approximately 16,000 single-family built-for-rent starts occurred in Q3 2021, the highest volume on record according to NAHB.

Jeff Tucker of Zillow reports on this issue, noting that since the 2008 recession, in the 35 largest U.S. metros there has been a shortage of 1.35 million homes permitted. At today’s homebuilding rate, that’s 2.7 years worth of permits.

“More than 1.5 million residential building permits were issued between February 2020 and February 2021 — a benchmark level of housing construction surpassed in every building boom since the 1970s. The problem is that after permit activity bottomed out in 2009 at the depths of the housing crisis, it took more than 11 years to get back to that threshold. The new home construction market today very much remains in catch-up mode, recovering from a decline that was both much steeper and took longer to come out of than in any previous construction cycle.”

Average permits historically - Zillow

Source: Zillow (Dec. 2021)

As we play catch-up, it could be a rough winter for homebuyers though, according to Redfin. “The number of homes for sale hit an all-time low during the week ending November 28, suggesting a difficult winter is in store for homebuyers. During the four-week period, sustained demand pushed the median home price to another record high, and a third of homes sold in one week or less.”

Find this content useful? Share it with your friends!