“Home-equity lending surpassed 2009 levels in 2013, with $111 billion in new home equity lines of credit (HELOCs) opened. In the fourth quarter, new lending increased 43% from quarter four 2012, according to data from Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool.”
“For those familiar with the events leading up to the financial crisis in 2008, the news that HELOC origination volumes have gone up may be troubling. But this isn’t 2007, which saw record-high HELOC originations. This recent increase is a good sign, according to Alan Ikemura, senior product manager at Experian Decision Analytics.”
“‘This specific product itself is finally coming out of this lull that we’ve been in for the past few years,” he said. ‘We believe it to be an outcome of an improvement in the (home) price appreciation across the country.’”
Being smart with HELOCs
“In the run-up to the housing crisis, not only were more people taking out HELOCs, they were also using them for some extravagant things, Ikemura said.”
‘The consumer that you see t0day is more responsible with the potential lines,’ he said. ‘It’s still discretionary, but I think it’s more of a need-based thing.’ He gave examples of people using HELOCs like ATMs before the recession, and now that people see the value coming back to their homes, they’re maybe looking at HELOCs as a way to make home improvements or to pay for children’s educations.”
Read full Market Watch article here.