A Wealth of Common Sense: America’s Piggie Banks Are Full

While markets hit new all-time highs, investors remain flush with cash. Besides holding cash on the sidelines, homeowners are sitting on record equity. Since the end of 2019, households have added over $12 trillion in equity.

Today, households now have nearly $32 trillion in equity, compared to about $6 trillion during the housing crash. While the days of treating a home as an ATM are well in the past, it’s a sign that households are playing it safe today.

The downside to all this wealth? It’s trapped. Homeowners who want to take out a new mortgage don’t want to pay 7%.

Especially when they refinanced just a few years ago at 3%. Home equity lines of credit, or HELOCs, have even worse rates, over 8%.

Should interest rates finally start to head lower, that could change. Homeowners would be able to cash out at more reasonable rate.

Meanwhile, money market funds now hold over $6 trillion today. That’s a record high, and nearly twice the $3.5 trillion since before the pandemic. With today’s high interest rates, those funds offer a good yield.

Once rates start to decline, that’s a lot of cash on the sidelines that could head elsewhere, such as the stock market.

Given the high levels of home equity and money sitting around earning interest, stocks could take off once rates decline.

To see the full amount of cash on the sidelines, click here.