U.S. homeowners are sitting on $11.5 trillion in tappable home equity but borrowed less than 0.1% of it in the second quarter, according to data technology company Cotality.
Tappable equity is the amount borrowers could pull out in debt while still leaving lenders enough value in the home as collateral. Total equity for mortgage holders reached $17.9 trillion, or roughly $310,000 per homeowner, up $6,000 from the prior quarter.
Even as homeowners originated nearly 20% more second mortgages and home equity lines of credit than in the first quarter, the borrowing amounted to a sliver of what was available.
"The borrowers with the most housing wealth are often the least likely to tap it," said Thom Malone, principal economist at Cotality. "They tend to have low mortgage rates, strong cash flow, and little reason to move."
That dynamic helps explain the gap. Millions of homeowners locked in mortgage rates below 4% during the pandemic refinancing boom. Trading that rate for a new loan at today's higher levels would raise their monthly payments, giving many a financial reason to leave their equity untouched.
The result is a pile of untapped cash that keeps growing. Home prices in most parts of the country are still posting small gains, compounding the value of that equity quarter after quarter.
The trend carries consequences for the broader economy. Home equity borrowing is a major channel through which rising housing wealth flows into consumer spending on renovations, debt consolidation and other purchases. When homeowners hold back, that money stays locked in their properties.
Lenders and real estate investors have taken notice. Banks have been pushing home equity products harder, and second-lien lending has drawn interest from private equity firms and institutional investors looking for yield.
But the data suggests those efforts are meeting limited demand so far. The gap between available equity and actual borrowing remains historically wide.
Whether that changes depends largely on where mortgage rates go. If rates fall far enough, more homeowners could find it worthwhile to refinance and pull cash out at the same time. Until then, economists expect the bulk of the nation's housing wealth to stay where it is.
