Park Community Credit Union - TransUnion Eyes Potential Home Equity Boom

Remember the HELOC boom of the 2000’s? It was going gangbusters right up until the global financial system nearly collapsed, led by a huge housing bust. Well, we may be back to the boom days soon, according to credit bureau TransUnion.

HELOC’s, (or home equity line of credit), allow homeowners to borrow against the equity accumulated as their homes increase in value, and mortgages are paid down.

Given the recent boom in home price gains across the U.S., it is perhaps unsurprising that U.S. homeowners are tempted to take out HELOCs. After all, they’re sitting on a huge pile of equity.

TransUnion said that approximately 10 million consumers are expected to originate a home equity line of credit (HELOC) between 2018 and 2022.

This would more than double the 4.8 million HELOCs originated in the previous five-year period (2012-2016).

“With aggregate home equity surpassing that of the housing boom in the mid-2000s, TransUnion is projecting between nine and 11 million consumers will originate HELOCs over the next five years,” said Joe Mellman, senior vice president and mortgage line of business leader at TransUnion.

TransUnion projects 1.4 million new HELOC borrowers in 2017 and 1.6 million in 2018, about a 30% increase from the previous two-year period of 2015 (1.1 million) and 2016 (1.2 million).

According to the study, there were 4.9 million HELOC originations in 2005 when home equity stood at $13.3 Trillion. HELOC originations dropped to a mere 600,000 in 2011 as home equity declined to $6.3 Trillion.

Home equity has once again risen to $13.3 Trillion in 2016, yet HELOC originations continued to be low at 1.2 million.

If you’re one of those homeowners “sitting” on a pile of equity, you will no doubt be on the receiving end of an increasing amount of HELOC marketing. Before you take the plunge, just remember that money borrowed against home equity adds to your indebtedness, and increases the time you’ll be writing checks before your home is owned free and clear.

In other words, if you’re sitting on a pile of home equity, consider the option of remaining seated.

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