During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.
Unlike during the housing bubble, very few homeowners have negative equity now. From CoreLogic this morning: Homeowner Equity Insights – Q2 2024
The report shows that U.S. homeowners with mortgages (which account for roughly 62% of all properties) saw home equity increase by 8.0% year over year, representing a collective gain of $1.3 trillion and an average increase of $25,000 per borrower since the second quarter of 2023, bringing the total net homeowner equity to over $17.6 trillion in the second quarter of 2024. …
From the second quarter of 2023 to the second quarter of 2024, the total number of mortgaged homes in negative equity decreased by 4.2%, to 1 million homes or 1.7% of all mortgaged properties.
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.In Q2 2024, mortgage debt increased $99 billion, up from $31 billion in Q1, and down from the cycle peak of $467 billion in Q2 2021. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.
However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).
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