Home equity lending in the United States is on the rise. While reverse mortgage volume has yet to benefit from that spiked interest, consumer curiosity about Home Equity Lines of Credit (HELOCs) appears to be translating into significant volume gains for that product, according to Bankrate.
“Online searches for ‘HELOC’ rose 305 percent this year, reaching an all-time high in July 2023, according to a Google traffic analysis by real estate platform RubyHome,” the Bankrate article said.
But that curiosity is also translating into volume. Based on data released by both ATTOM Data Solutions and the Mortgage Bankers Association (MBA) this past summer, “lenders originated more than 284,000 HELOCs in the second quarter of the year,” up from just under 252,000 in the first three months of 2023, while debt from home equity loans is projected to increase by more than 11% by the end of this year.
Part of this is likely due to a spike in home prices, which has been observed in the market since the beginning of the COVID-19 pandemic.
“The median home sales price stood at $394,300 in September 2023, according to the National Association of Realtors,” the article said. “While down from the record high of $413,800 in June 2022, it still represents a 2.8% increase year-over-year.”
Home equity-related debt also appears to be a growing segment of personal debt carried by homeowners. A survey for Creditcards.com showed that 7% of Americans hold debt in the form of home equity loans and/or lines of credit, but homeowners are also using equity as a source of extra cash to be able to further invest in their homes.
“Many people are tapping into their home equity to spruce up their homes, and better equip them to meet their family’s needs,” the article explained. “Borrowing money to upgrade their current home makes a lot more sense than trying to buy into a new one nowadays.”
That rise in home price appreciation, in addition to increasing levels of tappable equity for homeowners, also translates into a challenging housing market for prospective buyers, which may give some insight into the motives related to additional equity-based debt.