Home Equity: Tapping Out

Home ownership is a widely-shared financial goal. Among other benefits, homeowners can expect a much greater degree of wealth accumulation. With rare exceptions, residential real estate gains value steadily. In recent years, the pandemic-driven demand surge pushed U.S. home values up at an outsized rate of over 15% per year in 2021 and 2022; they have since held those gains.

But for all their benefits, our homes are not liquid assets. They sometimes feel quite the opposite, requiring homeowners to continually shell out for maintenance and taxes. We may feel wealthy for owning an appreciating asset, but with no cash flow to show for it. Gains in value are only realized after a sale—perhaps to move to a retirement destination, perhaps a windfall bequeathed to our next of kin.


If home equity were more freely realized, the potential benefit to consumption could be tremendous. The ICE Mortgage Monitor Report estimates that Americans have over $11 trillion of tappable home equity, the value that homeowners could borrow without exceeding an 80% loan-to-value ratio. Approximately 48 million mortgage holders have tappable equity, averaging $206,000.

Products are available to extract value from our real estate holdings. Mortgages can be refinanced, with additional cash borrowed in excess of the old loan’s principal. Refinancing, with or without cash taken out, is common in a falling-rate environment. Today, these deals are moribund. Borrowers are not eager to let go of their low fixed-rate mortgages.