Mortgage rates lock up Gen X wealth in Twin Cities' homes
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Median home values in the Twin Cities jumped nearly 41% in the past five years, Redfin figures show.
Why it matters: Seven in 10 Gen Xers own their home, meaning they should be in a position to benefit from rising valuations.
- But today's higher mortgage rates have made tapping into those equity gains less appealing or feasible for many.
What's happening: Most people aren't touching the $31.7 trillion of home equity U.S. homeowners are sitting on unless they need cash, housing finance experts tell Axios.
- Roughly nine in 10 home loan refinances nationwide were cash-out refinances in the first half of 2023, per Freddie Mac.
- The move allows homeowners to convert home equity into cash.
Zoom in: When Afton homeowner Kate Raleigh and her husband refinanced for a second time last year, they took out about $40,000 for a kitchen remodel.
- "I don't regret the use of our equity this way one bit because we are planning to stay in our house for several more years, so we get to enjoy it, and if we do move, it helps our home value," Afton tells Axios.
- St. Paul homeowner Jennifer Wagner took out a Home Equity Loan to remodel her kitchen last year. "We're definitely outgrowing our house with our two young daughters and a dog, but it's hard to walk away from our monthly payment," Wagner tells Axios.
The big picture: Consolidating debt is a big reason people are tapping into their home equity, Loan Pronto CEO Roger Moore tells Axios.
- Borrowers are also opting to expand or renovate their current home instead of moving, he says. People with a 700+ credit score can use HELOCs or HELOANs to keep their primary mortgage rate and access additional cash/credit.
Between the lines: Gen X is stressed about money. Nearly half of Gen Xers say they feel behind on retirement savings, according to a Bankrate study.
- Roughly two-thirds of Gen Xers say they're uncomfortable with their level of emergency savings, and 22% have no emergency savings at all, per the study.
The intrigue: It can take up to about 14 years for Twin Cities homeowners to break even.
- That's how long you have to stay in your house before you can sell and make a profit.
Threat level: Historically, experts say you need to stay in your home at least five years to break even.
Go deeper: Why mortgage rates are so high