Mortgage Equity Withdrawal Increased Sharply in Q4 2021

In the mid-2000s, the housing bubble led to a $250 billion increase in mortgage debt per quarter as homeowners borrowed heavily against their perceived home equity, and Q4 2021 saw a similar trend as mortgage debt increased by $245 billion. According to the CalculatedRisk Newsletter, not all 2021 mortgage debt is associated with equity withdrawal (MEW), but instead, some was used to increase housing stock through new home purchases.

Many homeowners today are cushioned by large home equities, meaning that a recent increase in mortgage equity withdrawals is not concerning, and economists predict that MEW will also decrease in 2022 as refinance activity declines.

In Q4 2021, mortgage debt increased $245 billion, the largest quarterly increase since 2006. Note the almost 7 year of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

Mortgage debt is up $1.05 trillion from the peak during the housing bubble, but, as a percent of GDP is at 48.9% - down from Q2 - and down from a peak of 73.3% of GDP during the housing bubble. This means most homeowners have large equity cushions in their home, and some MEW is not a concern.

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