Facebook
YouTube
LinkedIn
You are here: Home » Buying a home » A BULLISH SIGN?

A BULLISH SIGN?

I noticed a small article last week in one of the real estate trade publications that really caught my eye. It was talking about the projections for an increase in the number of HELOCs (Home Equity Line of Credit) over the next few years. The chart showed that from 2012-2016 there were 4.8 million new HELOCs but that from 2018-2022 they are expecting 10 million. That’s more than double.

 

So why is this interesting to me? Well, let’s think about what most people get a HELOC for. Maybe they want to remodel the house, put in a pool, put in solar panels, or they want to buy a car, or a boat, or pay down some debt. Nearly all of those uses will put money directly into the general economy.

 

Let’s look at a typical bathroom remodel: The contractor gets paid, their workers get paid, they need to buy materials so the local hardware store gets paid. When the workers come to the house, they may stop off to get gas in town, buy a sandwich, etc. Once it’s done, you’ll want to buy new towels so the department store gets paid. This money can then be multiplied throughout the economy as each of those recipients turn around and spend more.

 

Tapping into your home’s equity is a way to live a lifestyle beyond your current income, so it’s like giving people a pay raise. I am NOT suggesting this is a “good” or wise way to live. I’m just pointing out that this increase in HELOCs will probably result in people spending more money, which is good for the economy, which usually drives real estate prices even higher. Yes, this happened last time. Yes, that ended in disaster. We can only hope that the new lending rules prevent the excesses of last time. Lenders are supposed to verify that borrowers can actually afford their payments.

Subscribe

Like This Post? Get More News In Your Inbox!

Never miss important real estate news or changing market conditions!
Subscribe via RSS or email delivery!

Comments are closed.

Return to top of page

Contact Us

  • Sharp Realty
  • 320 Fairview Ave.
  • Brentwood CA 94513
  • P: 925.240.6683
  • F: 925.524.2302
  • E: info@SharpHomesOnline.com
  • DRE# 01858431