Here we go again. After a two year Wall Street engineered fraudulent boost in home prices in the exact markets that led the bubble in 2003 through 2007, the delusional dolts are now acting like the increase in home equity is real. Do delusional idiots congregate in California, Nevada, Florida, Arizona and Ohio for a reason? The morons in these markets are ramping up new home equity lines of credit at a 60% to 90% pace over the prior year.
It’s as if the lesson of the previous bubble was completely forgotten in a couple years. Are these people really that dumb? The housing market started rolling over six months ago. Prices peaked, new single family home sales peaked, existing home sales peaked and the Wall Street investors are exiting stage left. Now the very same Wall Street hucksters want you to borrow against the artificially inflated value of your house and spend that money on more shit you don’t need, or to lease a brand new Escalade. It’s called the American Way. So it goes.
HELOC Share of Total Loans at Highest Level Since 2008
Biggest Jumps in Inland California, Las Vegas, Cincinnati, Phoenix
RVINE, Calif. – Oct. 9, 2014 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its first-ever U.S. Home Equity Line of Credit Trends Report, which found that in the 12 months ending in June 2014 a total of 797,865 Home Equity Lines of Credit (HELOCs) were originated nationwide, up 20.6 percent from a year ago and the highest level since the 12 months ending in June 2009.
The report also shows HELOC originations accounted for 15.4 percent of all loan originations nationwide during the first eight months of 2014, the highest percentage since 2008.
“This recent rise in HELOC originations 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. “Nearly 10 million homeowners nationwide, representing 19 percent of all homeowners with a mortgage, now have at least 50 percent equity in their homes, according to RealtyTrac data. Meanwhile the percentage of homeowners with severe negative equity has decreased from 29 percent in the second quarter of 2012 to 17 percent in the second quarter of this year.
“The rise in HELOCs also reflects a natural evolution for a lending industry looking for products they can offer to homeowners who have already refinanced their first position loan into a low fixed rate,” Blomquist added. “A HELOC enables homeowners to leverage additional equity they may have gained since refinancing while still preserving the rock-bottom interest rate on their first position loan.”
Inland California, Las Vegas, Cincinnati, Phoenix post biggest annual increases
Among the nation’s 50 largest metropolitan statistical areas with HELOC data available, 49 posted year-over-year increases in HELOC originations in the 12 months ending in June 2014. The only metro area with a decrease was Rochester, N.Y., where HELOC originations decreased 1 percent.
Metro areas with the biggest year-over-year increase in HELOC originations were Riverside-San Bernardino in Southern California (87.7% increase), Las Vegas (85.1% increase), Cincinnati (81.0% increase), Sacramento (65.1% increase), and Phoenix (60.1% increase).
Major metros with the smallest increases in HELOC originations from a year ago were Minneapolis-St. Paul (0.2 percent increase), Louisville, Ky., (3.3 percent increase), Philadelphia (3.6 percent increase), Virginia Beach (4.3 percent increase), and St. Louis (5.6 percent increase).
U.S. HELOC originations 76 percent below 2005-2006 peaks
Despite the year-over-year increases, HELOC originations were well below their peaks from the previous housing boom. Nationwide, the 797,865 HELOC originations in the 12 months ending in June 2014 were 76 percent below the previous peak of 3,299,007 in the 12 months ending in June 2006. The 15.4 percent share of HELOCs year-to-date nationwide was also below the 24.7 percent share in 2005.
HELOC originations were below their previous peaks in 49 out of the nation’s 50 largest metro areas. The only exception was Pittsburgh, where HELOC originations reached a new peak in the 12 months ending in June 2014.
Major metro areas with the biggest decrease in HELOC originations in 2014 compared to their previous peaks were Riverside-San Bernardino (down 93 percent), Las Vegas (down 92.9 percent), Miami (down 92.5 percent), Tucson, Ariz., (down 92.4 percent), and Orlando (down 92.2 percent).
HELOCs biggest share of originations in Honolulu, Upstate NY, Cleveland, Milwaukee
Among the nation’s 50 largest metro areas, those with the highest share of HELOC originations as a percentage of all loan originations year-to-date in 2014 were Honolulu (43.5 percent), Rochester, N.Y., (38.7 percent), Buffalo, N.Y., (32.1 percent), Cleveland (28.5 percent), and Milwaukee (27.5 percent).
Major metro areas with the lowest share of HELOC originations as a share of all loan originations year-to-date in 2014 were Las Vegas (5.8 percent), Dallas (6.5 percent), Riverside-San Bernardino (7.7 percent), Houston (7.9 percent), and Tucson, Ariz. (8.0 percent).
Other markets where HELOC originations represented less than 10 percent of all loan originations year-to-date in 2014 were Atlanta (8.1 percent), San Antonio (8.6 percent), Oklahoma City (9.2 percent), and Austin (9.9 percent).
Report methodology
The RealtyTrac U.S. Home Equity Line of Credit Trends Report provides counts of HELOC loans originated and the HELOC share of total loans originated using mortgage and deed of trust records collected in more than 900 counties nationwide with a combined population of more than 240 million, representing 78 percent of the U.S. population. Home Equity Lines of Credit are non-purchase loans that are secured by the equity (the appraised market value of that property minus any other loans secured by that property) and can be used by homeowners to fund home improvement projects or other purchases.
“Are these people really that dumb?” ———— Admin
No. Think about the dumbest fuckwit imaginable …. these HELOC coveting dipshits are even dumber than that.
The EASIEST sale in the mortgage biz .. perhaps even in the whole world …. is a client who wants to use their home as a piggy bank. The is no selling involved. Just show them where to sign on the dotted line. That’s ALL there is to it.
People who have never gotten a HELOC may not understand that if the HELOC is part of an overall refinance ….. then the “cash out” is an “add-on”. “Add-on” meaning that the loan’s interest rate WILL increase, even for the best qualified applicants. So, even if you pay off the HELOC early … you’ll still be paying for it, via higher interest rate, for the life of the mortgage. Depending on several factors, the interest rate can increase as high as 2%, or more. And yet ….. people don’t give a fuck. “Just gimme the money!!”.
It’s a scam. The bank benefits LONG after the consumer buys whatever shit they can with their HELOC money.
People simply do not understand this basic premise: if the bank is willing to lend you money, it’s ONLY because ….. THEY WIN, and YOU LOSE, in the long run.
The times in which we live remain on Fantasy Island, only this is one where they eventually kick you off the island and into shark-infested seas.
Charles Mackay’s chronicles of the South Sea Bubble and John Law’s Mississippi Scheme (both in the early 1700’s) do not begin to compare to the conditions most people have come to see as “normal.”
Never in recorded history have so many people collectively spun a fantasy and then attempted to move their entire lives into it.
There isn’t a hole deep enough for me to crawl into and feel safe from the eventual denouement of this orgy of folly.
Woah man this is REALLY fucked up. There is no one – NO ONE – in Las Vegas, Phoenix, or metro Detroit, who has positive equity in their house that you could legitimately borrow against. NO ONE. Economically speaking their real estate markets got nuked, conquered, Ebola’d, Obama’d, Obola’d, Moochelle’d, and devastated too.
I can only guess this is setting us up for another perfect repeat of 2008, with the banksters again extorting Congress to cover their idiotically bad losses.
I think this is the crack-up boom, kids.
I think these people are ‘tapped out’ And are borrowing just to pay the bills.
It’s all the fuckin’ YANKEES that come down south and go out west and stick a dick in everything! They bring progressive attitudes and tell us how to live. They try and change our 2nd Amendment rights into the same bullshit that NY, NJ, MA, and CT have. Stay home, we don’t want you or your bullshit!
Don’t worry ,Obama has a plan to help all these poor ,dumb people.Tax guys like me even more .
I note that prices in Californica, or at least in the coastal areas, has been run up past the peak prices of 2006, and that they’ve now run out of lemmings to flip their $750K stucco 1940-vintage 800 sq ft shanties to. Sales are stalling, but many folks have “positive” equity that can be converted to BMWs, boob jobs, and other consumer goodies.
This is something you can’t blame Obama for, or at least not anymore than you could blame any other pol of the past 44 years whose electability is tied to the short-term goodies made available by the increasing financialization of our economy.
Financial finagling and borrowing money into existence is the only skill we as a nation have left anymore. We have let other nations take the lead away from us in every other field of endeavor, except, perhaps, vulgar entertainment.
So, if you can’t be like Miley Cyrus and twerk your way to $100M, then you have to be one of the people making their money on the skim from all the financial products. The rest of us are the skimmees.
New Home Prices: Are they Really Up this Year? Homebuilder Freebies: Reduced Closing Costs, Free Pools; Housing Has Peaked This Cycle
Thanks to ultra-low interest rates, massive all-cash purchases by private equity funds, and Fed-sponsored financial speculation, home prices are now back in bubble territory.
Yet, builders that had an easy time of things for a few years now offer Freebies as U.S. Housing Markets Cool.
Joseph Beben wasn’t in the market for a house until he heard about a year-old community in suburban Phoenix where 10 homebuilders are offering buyers incentives such as swimming pools, built-in barbecues and subsidized mortgage rates.
Beben, a 33-year-old general manager at Best Buy Co. (BBY), visited three of the sales offices flanking the main corridor of The Bridges at Gilbert, whose 17 subdivisions are among the about 200 locally that have opened since early last year. He settled on Woodside Homes’ community within The Bridges after the builder agreed to cover as much as $10,000 of his closing costs, and throw in another extra he liked.
“When I saw this deal, it looked like a good business decision,” said Beben, who will pay $332,000 for a 3,000-square-foot.
Not a Business Decision at All
It may, or may not turn out to be a good speculative move, but Beben is seriously misguided if he equates personal decisions as “business decisions” unless asset speculation is his business (which it clearly isn’t).
Major City Sales Slowdown
“Phoenix is very slow, Sacramento is spotty,” said John Burns, a housing consultant based in Irvine, California. “The investors came in and pushed prices a little too high. And then FHA rocked the new-home market really hard.”
“Phoenix is a cautionary tale about raising prices too aggressively and opening up communities too aggressively,” said Alex Barron, senior research analyst at Housing Research Center LLC in El Paso, Texas. “It’s a bad combination where affordability got out of control and the FHA limit went down. Homes are unaffordable now, and all of a sudden there’s a ton of supply.”
FHA Reduced Limits
In January, the federal government, which is reducing its share of the mortgage market to lure back private capital, cut FHA loan sizes in 652 high-cost U.S. counties. In Phoenix, the limit dropped to $271,050 — about $24,000 below the median prices of a new home — from the previous maximum of $346,250. The limit shrunk by 28 percent in the Las Vegas region, and 18 percent in the Sacramento area.
“We were having a nice robust recovery and then that happened,” said Buddy Satterfield, president of the Arizona division for Shea Homes, which has two communities in The Bridges and is opening one in Eastmark. “When you take the FHA limit down to $271,000, you hit us right in our sweet spot.”
After jumping 32 percent in 2013, new-home sales in the Las Vegas area in the first eight months of this year fell 26 percent from a year earlier, he said. Smith said he recently spoke with a builder who lost a sale in the Las Vegas area to a competitor who cut the price by $17,000 and covered closing costs.
“It’s a big adjustment,” Smith said. “It’s hard for builders to cut their pace when they’ve been trying to rejuvenate their numbers over the past five years.”
In Phoenix, the supply increased 26 percent. Existing-home prices in the area rose 4.4 percent in August from a year earlier, compared with an increase of 6.4 percent nationally, property-information provider CoreLogic Inc. (CLGX) reported today.
Housing Has Peaked This Cycle
Supposedly, prices are up 4.4% from a year ago in Phoenix and over 6% nationally.
I have a question: Does that include reduced closing costs, free barbecues, and free $20,000 pools?
Downturns start with rising building inventory, competition, and freebies that do not immediately show up as price reductions.
I think this rebound in new home prices has peaked nationally even if prices purportedly show nominal price increases for a while.
In Beben’s case, he got $10,000 off on closing costs and $22,000 towards a swimming pool according to Re/Max Solutions agent Tim Ehlen.
That’s $32,000 off a home that would have sold last year for $364,000, a decline of 8.8%.
Taking freebees into consideration, it’s safe to conclude new home prices in Phoenix are not up 4.4% on the year as reported. I suggest prices are likely down somewhere between 5% and 10%
Read more at http://globaleconomicanalysis.blogspot.com/#qdg6kbL5FR7Ctq3i.99
“Beben, a 33-year-old general manager at Best Buy Co. (BBY), * * * * “When I saw this deal, it looked like a good business decision,” said Beben, who will pay $332,000 for a 3,000-square-foot.”
Does anyone else see the problem here? A 33yo manager at Best Buy should be polishing his resume and maybe getting an MBA, not taking out a big mortgage for a huge house he doesn’t need, which will be underwater within 2-3 years, right about the same time that Best Buy goes out of business and Beben is unemployed.
People NEVER learn, do they?
As an aside, if a general manager at Best Buy thinks that’s a good business decision, I guess that tells us all we need to know about where BB currently is, and is heading to.
We should tell him that Sears is the hot place to work right now. I’m sure that would be a good business decision for him too.
the paper mill in my area just announced its closing after 85 years. more than 500 people will be out of work. i think this HELOC scam is just the ticket for them to maintain their peasant like lifestyle. i’ll be sure to pass it along at the next town meeting.
Dutchman may be right. I think there is a lot more desperation on the part of many people to get their hands on cash by whatever means. Much less of a party-time atmosphere than in 2006.
And maybe they figured that if things go sour, they have a few years of rent-free living before the foreclosure eviction.
So much craziness, and contradictions. I read within the last week (maybe here) that new mortgage originations are now running 70% below this time last year. Yet prices are still pumped up. And builders are still building???
I expect the Fourth Turning to accelerate big-time next year, as Rome 2.0 crumbles. Looking forward to Admin’s Part 2.
“I expect the Fourth Turning to accelerate big-time next year”
It’s always “next year”, isn’t it?
Actually, I agree and do think 2015 will be pivotal (in a bad way).
HOLD THE PRESS…
Remember total first loan volume is down 75% from May 2013 when rates rose to the “nosebleed” 4.5%.
As such, HELOC volume really hasn’t surged at all. In fact, it probably has dropped. You have a denominator problem here.
Mark
Scratch the previous post.