Home Equity Again Being Used for Cash

Metro Atlanta and home equity lines of credit (HELOCs):

Number of lines opened in past year: 10,674

Increase in HELOCs over year: 38.70 percent

Compared to pre-recession: Down 268 percent

Atlanta’s rank in number of HELOCs: 16th in quantity

Metro Atlanta homeowners are again starting to hit the home ATM – but nothing like during the heyday of the housing bubble.

The number of home equity lines of credit being “originated” – or opened – in Atlanta jumped 38.7 percent during the past year to a total of 10,674, according to a study released Thursday by RealtyTrac, a real estate data company.

That is down 268 percent from Atlanta’s peak in home equity loans back before the recession and the collapse of home prices.

Atlanta ranked 13th nationally in the rate at which home equity lines are growing. It ranked 16th in the number of equity lines being opened.

Still, Atlanta has been adding home equity lines faster than the nation as a whole: The national average for the opening of home equity lines was up 20.6 percent.

“This recent rise in (home equity lines of credit) 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, RealtyTrac vice president.

This was the company’s first report on home equity lines of credit. While the Federal Reserve Bank collects similar data, RealtyTrac’s will be much more timely.

According to the most recent data from the Federal Reserve, home equity lines of credit account for more than a half-trillion dollars in consumer debt nationally.

As home prices rose a decade ago, millions of Americans hit the home equity line of credit, or HELOC, to the tune of many tens of billions of dollars each year. The money, used to pay bills and make purchases, was important fuel for overall economic growth.

The practice slowed down when housing prices crested, and it stopped when prices collapsed – a shift that undermined consumer spending as the recession deepened.

The housing bubble peaked nationally in 2006, and a year later in metro Atlanta. Prices in many places have not risen back to their peak levels. That means many homeowners are still underwater – that is, they owe more on their mortgage than their homes are worth.

An underwater homeowner generally has trouble refinancing a mortgage and cannot get a home equity line of credit – since he or she does not have equity. However, home equity lines are picking up because 19 percent of American homeowners – nearly 10 million nationally – now have regained at least 50 percent equity in their homes, according to RealtyTrac data.

In general, the increase in HELOCs comes with the economy generally improving, jobs being added and consumer credit improving.

That is, the willingness of lenders to lend is rising as well as the ability of consumers to pay what they owe, according to a paper released Thursday by Wells Fargo economists.

“As a percent of disposable personal income, debt payments made by households remain historically low,” wrote John Silvia, Wells Fargo chief economist, and Mackenzie Miller, economic analyst.

Debt now is just below 10 percent of disposable income, compared to more than 12 percent before the recession, they said. “(C)onsumers are far less leveraged than in the past.”