With housing prices hitting record highs around the country, a new report from TransUnion suggests that around 10 million homeowners are expected to take out home equity lines of credit (HELOCs) over the next four years.
CNBC reports:
That would be more than double the amount of originations between 2012 and 2016. This comes as the amount of available home equity has jumped to more than $13 trillion today from $6.3 trillion in 2011, the bottom of the last housing crash.
HELOCs, which are often loans after the primary mortgage, usually rise and fall along with home equity, but that didn’t happen following the recession. There was a significant pullback in lending, as banks considered the loans too risky and too difficult to originate, given the stricter underwriting guidelines that were implemented.
Because leveraging a highly appreciated asset in a rising-rate environment with household debt already at record highs has never led to disaster…
Experts, of course, assume the HELOCs are going to be used to ‘repair and renovate’ homes – instead of upgrading and maintaining the gluttonous lifestyles of millions of homeowners – just like last time.
“Recent strengthening of the U.S. economy, tight housing inventories, and healthy home equity gains are all working to boost home improvement activity,” Chris Herbert, managing director of the Joint Center for Housing Studies, wrote in a recent survey.
“Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance,” Herbert said.
Sure Chris.
It won’t all be drunken pirate borrowing, I’m sure. HELOCs are a great way to consolidate high interest debt from credit cards and auto loans – however homeowners should keep in mind that the penalty for defaulting on a HELOC is losing one’s home.
debt slaves forevah or homeless, hmmmm….