Homeowners Tap Rising Equity With HELOCs

REAL ESTATE TRENDS

Homeowners are taking advantage of rising real estate prices by tapping into their newly replenished home equity.

Home equity lines of credit, also known as HELOCs, are up nearly 21% from a year ago—their highest level since June 2009, according to the first-ever U.S. Home Equity Line of Credit Trends Report by RealtyTrac, a California-based housing data research company.

Home values are still below their 2006 peak, but the report indicates a clear shift from the days of declining values.

“An increasing number of homeowners are gaining confidence in the strength of the housing recovery,” said Daren Blomquist, vice president of RealtyTrac.

Nearly 10 million homeowners now have at least 50% equity in their homes, Blomquist said. That’s 19% of all homeowners with a mortgage, according to RealtyTrac data.

HELOCs lost favor during the housing crisis as home values plummeted and owners were left in negative-equity positions—meaning they owed more than their home was worth.

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Today, fewer homeowners are upside-down on their mortgages. In the second quarter of 2012, 29% of all homes had severe negative equity, according to RealtyTrac. That number is now 17%.

No surprise, Southern California led the way with the highest year-over-year increase in HELOC originations, with a nearly 88% increase. It’s followed by Las Vegas at 85% and Cincinnati at 81%.