Home Equity Opportunities

American Homeowners: House Rich, Cash Poor Like Never Before

Sarah Dekin

April 02, 2019

It’s not a secret: home prices in the United States are rising rapidly, while employee wages are remaining stagnant. The result? Americans today spend a higher percentage of their income on housing than ever before.

Hometap wanted to know how this crunch between wages and home prices impacts today’s homeowners, so we went out and asked more than 600 people who’ve owned their home for at least five years about their views on all things homeownership. We looked at everything from whether or not it still comprises the American dream, to the realities of financial strain, and even their confidence level 10 years after the 2008 housing crisis.

The results confirm some things we know, like millennials are facing increased financial pressure due to student loans, but others that surprised us, such as Boomer’s higher resilience regarding the 2008 housing crisis. Read on to learn more, and see how today’s homeowners are both struggling and thriving in a time when ‘house rich,’ and ‘cash poor’ has never been more true.

This post is the first of a three part series that breaks down the overall findings as well as examines the differing views of the younger and older generations of homeowners.

The American Dream is Not Easy to Achieve

In a recent study conducted by Hometap of over 600 homeowners in the United States, 93% of respondents said homeownership is a personal financial goal of theirs, while 88% equate homeownership with a higher level of personal success.

Combined with the reality that housing in America is becoming increasingly scarce and increasingly expensive, these findings demonstrate the American dream may be alive and well, but it is ever-more-challenging to achieve.

Survey respondents state that while their salary has gone up only 5% in the past 5 years, the value of their home has gone up 27%. While that’s good news from an equity perspective, it’s challenging for those just entering the market looking to purchase their starter-home (if they can even find one).

This sentiment is consistent with a study by S&P CoreLogic Case Shiller Home Price Indices, which indicates home prices have increased 48% since 2012, while wages have only increased by 14%, on average.

When it comes to the homeowners surveyed by Hometap, 65% say their housing costs are rising faster than their wages, making it hard to achieve other financial goals, including increasing savings and disposable income, paying off debt, helping children pay for college, and starting their own business.

Homeowners are House Rich, but Cash Poor like never before

Hometap survey respondents reported an average of $122,000 in home equity, but only 1 in 3 believe they can easily access that equity should they need to.

97% of respondents have other financial goals in addition to homeownership, but high monthly housing payments combined with an inability to access equity severely challenges these goals.

Debt Stress

It comes as no surprise that homeowners are unhappy with current financing options given their views on debt. 63% cite debt as one of their biggest daily concerns, while 91% say they would prefer financing options that allow them to tap into their home equity without taking on additional debt.

In fact, the overall interest in “no debt” choices among homeowners is higher than any other available option, including refinancing and home equity loans.

70% of homeowners surveyed by Hometap are interested in new financing options that allow them to convert equity to cash without taking on more debt. 2 out of 3 homeowners surveyed by Hometap are interested in new financing options that would help them more easily purchase a home without taking on debt.

The Result: Homeowners don’t do anything but stay house rich and cash poor

That’s right - the majority of homeowners haven’t even considered available options to tap into their home’s equity. However, if they could access that capital without taking on additional debt, here is how they would spend it:

  • Pay off credit card debt: 40%
  • Reinvest it: 37%
  • Remodel: 34%
  • Fund my retirement: 31%
  • Purchase a second home: 27%
  • Pay off student loans: 22%
  • Pay for children's college: 20%
  • Pay a life expense such as medical bill: 16%
  • Help family or friends with an expense: 11%

When it comes to accessing their equity, the majority have never even considered most of the available options such as taking out a HELOC, home equity loan, or second mortgage. In fact, over 50% of homeowners have actually considered selling their home before tapping into their equity.

With an average of $122K in equity, yet a day-to-day where respondents reported spending more than 50% of their salaries on housing costs, homeowners are the exact definition of house rich and cash poor.

At Hometap, we believe it’s time for a change. We believe you should be able to have your house and your life and we believe the secret to getting both is unlocking the equity you’ve already earned.

Isn’t it time American homeowners end the house-rich, cash-poor situations and actually have both a house and a life?


Sarah Dekin

is a

CMO

at Hometap.