U.S. homeowners’ equity has reached a historic high, with $ 35 trilion, serving as a substantial financial backstop for the economy in the event of a recession. In such a scenario, homeowners have the option to refinance their mortgages and tap into this equity as a financial cushion (vs. U.S. GDP value of $ 27 tr.). Thus, homeowners’ equity acts as a valuable reserve for “bad days” – even more as the U.S. homeownership rate is ~65%. While refinancing is currently not economic, this will change once rates fall. Lower rates will also lead to an increase in housing starts, which provides further support to the economy, keeping in mind that almost 15% of the U.S. employees work direct or indirectly in the housing sector.
- Alternative Credit Letter, Blog
U.S. home owners’ equity serves as backstop for economy
- Alternative Credit Letter, English
