Home Equity Lines of Credit Jump

October 09, 2014, 1:23 p.m. EDT 2 Min Read

A total of 797,865 Home Equity Lines of Credit (HELOCs) were originated nationwide in the 12 months ended June 2014, up 20.6% from a year ago and the highest mark since the 12 months ending June 2009, according to RealtyTrac's U.S. Home Equity Line of Credit Trends Report released Thursday.

The report shows HELOC originations accounted for 15.4% of all loan originations nationwide during the first eight months of 2014, the highest percentage since 2008.

"This recent rise in HELOC originations indicates that an increasing number of homeowners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis," said Daren Blomquist. "Nearly 10 million homeowners nationwide, representing 19% of all homeowners with a mortgage, now have at least 50% equity in their homes, according to RealtyTrac data. Meanwhile the percentage of homeowners with severe negative equity has decreased from 29% in the second quarter of 2012 to 17% in the second quarter of this year."

Blomquist said the rise in HELOCs also reflects a natural evolution for a lending industry looking for products to offer homeowners who already have refinanced their first position loan into a low fixed rate.

"A HELOC enables homeowners to leverage additional equity they may have gained since refinancing while still preserving the rock-bottom interest rate on their first position loan," he said.

Among the nations 50 largest metropolitan statistical areas with HELOC data available, 49 posted year-over-year increases in HELOC originations in the 12 months ending in June. The only metro area with a decrease was Rochester, N.Y., where HELOC originations decreased 1%.

Metro areas with the biggest year-over-year increase in HELOC originations were Riverside-San Bernardino in Southern California (87.7% increase), Las Vegas, Nev. (85.1% increase), Cincinnati (81.0% increase), Sacramento, Calif. (65.1% increase), and Phoenix (60.1% increase).

Despite the year-over-year increases, HELOC originations are well below their peaks from the previous housing boom. Nationwide, the 797,865 HELOC originations in the 12 months ending in June were 76% below the previous peak of 3,299,007 in the 12 months ending June 2006. The 15.4% share of HELOCs year-to-date nationwide also was below the 24.7% share in 2005.

HELOC originations were below their previous peaks in 49 out of the nations 50 largest metro areas. The only exception was Pittsburgh, where HELOC originations reached a new peak in the 12 months ending in June 2014.

Major metro areas with the biggest decrease in HELOC originations in 2014 compared to their previous peaks were Riverside-San Bernardino (down 93%), Las Vegas (down 92.9%), Miami (down 92.5%), Tucson, Ariz., (down 92.4%) and Orlando (down 92.2%).

The RealtyTrac U.S. Home Equity Line of Credit Trends Report provides counts of HELOC loans originated and the HELOC share of total loans originated using mortgage and deed of trust records collected in more than 900 counties nationwide with a combined population of more than 240 million, representing 78% of the U.S. population.