The money is flowing to homeowners, which means they are always in it. Due to the rapid rise in home prices, the national average home equity reached new levels over the past two years.

The amount of money mortgage holders could pull out of their homes while still keeping a 20% equity cushion rose by an unprecedented $1.2 trillion in the first quarter of this year, according to a new analysis from Black Knight, a mortgage software and analytics firm. The increase is the biggest quarterly since Black Knight began keeping track of the number in 2005.

The so-called “tappable equity” of mortgage holders was 34% higher in April, which is $2.8 trillion more than a year ago. The total tappable equity was $11 trillion. This is two-times the 2006 peak. It works out to around $207,000 per homeowner.

According to Black Knight, high-credit borrowers who have low mortgage rates are the majority of those with tappable equity. Nearly three quarters of these borrowers have rates lower than 4%. Current rates for a 30-year fixed mortgage are above 5%.

Prospective buyers are being priced out more often due to rising home prices. The mortgage rates are also rising rapidly, making homeownership more difficult for many.

“It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years,” said Ben Graboske, president of Black Knight Data & Analytics. “Depending on your position, this market may be either the best or worst.”

However, the housing market is beginning to show signs of cooling. Black Knight reported that home prices rose 19.9% in April year-over-year, compared to the March gain of 20.4%. Slower growth may be a sign of rising rates’ impact.

Graboske explained that “April’s fall is most likely a sign deceleration because of the modest rate hikes in late 2021 or early 2022 when rates started ticking upwards.” It will take some time for repeat sales indexes to reflect the March 2022 and April 2022 rate increases.

Although rising interest rates are known to have a cooling effect on home prices in the past, supply is still extremely low in this market. With about 820,000 listings less than usual spring seasons, active listings are only 67% below their pre-pandemic level.

In the current market, home-owners are more likely not to sell their houses and to use some of that huge equity to renovate. These home equity loans are preferred now because the owner probably wouldn’t like to lower their initial mortgage rate or pull out any cash.

According to a Harvard Joint Center for Housing report, home-improvement spending is expected to rise by close 14% next year.

Sophia Wedeen from the Center’s Remodeling Futures program, said that record-breaking home prices, strong home sales and higher incomes all contribute to stronger remodeling activity, particularly in the South and West.