“All totaled, there was $64 billion in equity tapped via cash-out refinances over the past 12 months, the highest dollar amount for any equivalent 12-month period since 2008-2009,” said Ben Graboske, Black Knight senior vice president. “Even so, this amounted to less than 2 percent of available equity being tapped. This is slightly below the post-crisis norm, and 80 percent less than the total amount of equity extracted from the market in 2005-2006.”
Consumers are saving more now than they were just a few years ago, when the financial crisis was even closer in the rear-view mirror. The savings rate in December rose to the highest level in three years, according to the Commerce Department. Spending, meanwhile, remained flat.
Read MorePending home sales rise just 0.1% in December
The average credit score of borrowers doing cash-out refinances is also quite high at 748, suggesting lenders are still highly risk-averse. The fact that the score is so high means that it is the borrower’s choice to take a smaller loan, not the lender requirement.
“The people that are transacting have passed the credit screens. Borrowers are taking out what they need. It’s the mindset right now. Use what you need and not more,” said Graboske. “The only other explanation would be a lender level credit overlay, but these levels would be unprecedented. There is definitely money being left on the table.”
The money may be left on the table, or in the house, but that appears to be where the bulk of borrowers today want it. The financial crisis of 2008 may be closing in on a decade ago, but just like the Great Depression it is having a lasting effect on a generation.
“The memories are seared in people’s minds who went through it. They’re getting more comfortable with a lower debt rate. It’s turning into a secular change in behavior in saving for a rainy day,” said Peter Boockvar, chief market analyst at the Lindsey Group.