For most homeowners, a good portion of their money is tied up in their house. But a sizable number are no longer content to sit on that nest egg and watch it grow. They want cash – now – and they’re tapping their home equity to get it.
In the first quarter of this year, the number of people taking home equity lines of credit jumped 18% from the previous quarter and 14% from the same time period last year, according to a recent report from property analytics firm ATTOM Data Solutions.
In just three months, nearly 350,000 borrowers took out HELOCs, according to ATTOM. The cities with the most impressive upticks in HELOC volume were Hartford, Connecticut (up 80%), Nashville, Tennessee (up 74%) and Las Vegas (up 69%).
“Putting home equity to work is the name of the game in the 2018 housing market – both for current homeowners as well as homebuyers,” said ATTOM Senior Vice President Daren Blomquist.
At $67 billion, current HELOC dollar volume pales in comparison to its 2006 heyday of $140 billion. But some, including Freddie Mac, say they expect it to continue its steady climb thanks to rising interest rates and home prices. In its 2018 forecast report, Freddie Mac said borrowers tapping their home equity will be a major trend driving the market forward this year.
A report released last year by TransUnion made similar assertions, estimating that 10 million consumers will take HELOCs between 2018 and 2022, which would be more than double the number of HELOCs originated from 2012-2016.
Despite these predictions, some were worried that federal tax laws instituted last year would dampen HELOC activity.
The Tax Cuts and Jobs Act mandated that homeowners who withdrew equity and did not use it to renovate, build or purchase a home were no longer able to deduct the mortgage interest from their taxes, in effect making these loans more expensive for some borrowers.
But it seems homeowners want that equity, and they won’t be deterred. A survey from TD Bank revealed that most HELOC borrowers want the cash to renovate, while accessing emergency funds and paying for education came in second and third, respectively.
With home price confidence staying strong, it seems many feel comfortable accessing their hard-earned equity to fund their needs now.