Rising home prices are causing an affordability crisis, keeping many from entering the home buying market.
So, while roughly two-thirds of Californians can’t afford to buy a home, homeowners in the state are taking advantage of these rising values.
The number of homeowners taking out home equity lines of credit, home equity loans and cash-out refinance mortgages in the second quarter increased significantly from the same period last year, according to a new report released by the California Credit Union League.
Many homeowners regained equity in the second quarter and rising home prices pushed up home values, according to the latest report from CoreLogic, a global property information, analytics and data-enabled solutions provider.
This means 92.9% of all mortgaged properties now have positive equity, or about 47.2 million homes.
Data reported form 339 credit unions in California shows originations for the combined category of HELOCs and home equity loans increased 15% to more than $2 billion.
This increase brought total HELOCs and home equity loans 5% higher to $10 billion. This is up from 2013’s low of $9.2 billion, but down from 2008’s $14.2 billion.
On the other hand, originations for first-mortgages decreased 10% to $7 billion. First-mortgages outstanding, which includes cash-out refinances, increased 13% to $53.2 billion, a record dollar amount.
“The local surge in home-equity lending and cash-out refis reflects a strong national trend in homeowners increasingly remodeling their homes and enhancing their properties,” said Dwight Johnston, California Credit Union League chief economist.
He said many neighborhoods across California have enjoyed rapid price appreciation, but some select areas still have a percentage of homes that are underwater or have little equity.
“As more of these homeowners see the light of day with values rising, we’ll see more of this remodeling trend,” Johnston said. “Pulling out home equity seems to have legs and is here to stay, especially since job growth across California remains strong and is supporting household stability.”
However, according to CoreLogic’s report, some homes still have a very small amount of equity, which they could lose if home values drop.