Higher home prices nationwide have produced a $260 billion increase in the amount of equity that Americans have in their homes, CNBC reports. It quotes Black Knight Financial Services as saying 38 million borrowers now have at least 20% equity in their homes, up from 24 million four years ago. Meanwhile, applications for mortgage refinancings have shot up lately, particularly since the U.K.'s Brexit vote helped push down yields for U.S. bonds (mortgage rates are closely aligned with the government's 10-year Treasury notes).
Combine those two factors and you get favorable conditions for homeowners to tap their home equity lines of credit and hire remodelers. But CNBC notes:
Borrowers today, however, are still cautious. While 42% of refinances in the first quarter of this year were "cash-out," homeowners only tapped a collective $20 billion. That may sound like a lot, but it was just one half of 1 percent of the cash available to borrowers, according to Black Knight.
There are lots of signs that spending on remodeling has risen and will continue to go up. Then again, during the last housing boom, homeowners "used their properties like cash machines," pulling out more equity than the house or the market could support, CNBC said. "Arguably, no one wants to see that again, and so far, it is not happening."
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