Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Seems like the “housing ATM” is warming up already which is a bit surprising considering how much wealth was stripped of housing in the past half decade. But according to the statistics cash withdrawals out of the house are back to levels not seen since the financial crisis began. More from BusinessWeek:
- For six years starting in 2006, home-equity lines of credit were in decline. Now the loans, which allowed Americans to use their homes like credit cards as they spent freely on luxury cruises, cars, and television sets, are back. Lending for so-called Helocs will rise 30 percent, to $79.6 billion, in 2012, the highest level since the start of the financial crisis in 2008, according to Moody’s Analytics, which projects the total will jump an additional 31 percent, to $104 billion, in 2013.
- Rising house prices mean people have more equity to borrow against. The median U.S. home price probably will rise 8 percent this year, the fastest pace of growth since 2005, according to the Mortgage Bankers Association.
- From 2000 to mid-2006, consumers used about $677.3 billion, or about $113 billion a year, from home-equity loans for consumer spending, according to a 2007 paper by former Federal Reserve Chairman Alan Greenspan and Fed economist James Kennedy. Lenders would often approve lines of credit that exceeded home values.
- The revival in Helocs comes as lenders including Bank of America, Wells Fargo, and Citigroup are still grappling with bad loans made during the housing boom. Pressed by regulators earlier this year, banks charged off—or declared worthless—$4.5 billion of equity loans in the third quarter, the most in two years, according to Federal Reserve data.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
