Mortgage rates still hover at all-time lows, touching 3.31 percent last week for a conventional 30-year loan and as low as 2.65 percent for a 15-year deal. And as this Los Angeles Times article points out, home sales and new construction are gaining, as well — making now a good time to look at residential real estate from the financing perspective.
The most intriguing story, to me, is this one from Bloomberg, citing a Moody’s study that home equity lines of credit will jump to nearly $80 billion this year in the U.S. after six years of decline. Seen by some as a ”using your house as an ATM” product that caused consumers to deplete equity and end up underwater when housing prices plunged, the lines of credit and their sister, home equity loans, now are seen as a harbinger of desperately needed consumer spending. The article says next year, HELOCs will rise to $104 billion, putting that much money in household pocketbooks for home improvements, retail purchases and other bill payments.
You might take a look at how home equity is being tapped in your market. Here’s a Cleveland Plain Dealer story citing credit-rating agency Equifax about various debt trends in that community; here’s a link to the November press release based on Equifax’s monthly Consumer Credit Trends report – you might ask if they’ll peel out home equity trends for your market. You might also check with title companies about what they are seeing in terms of home equity liens; to find practitioners in your area, use the searchable database on the site of the American Land Title Association.
Of course, you’ll want to poll lenders, too, and be sure to include some caveats from consumer advocates and credit counselors. A sidebar on prevailing HELOC rates, terminology and tips would be useful. Bankrate.com is a reputable source of information and analysis; last week their expert Greg McBride reported that HELOC rates had dropped for the fourth straight week.
Purchase and refinance activity is of interest, too, of course. The weekly Mortgage Bankers Association’s weekly applications survey offers a look at national trends you can quiz local lenders about; last week it said refi requests were more than 80 percent of all applications. Note also that requests for adjustable rate mortgages — another product seen to have prompted pre-recession consumers to bite off more than they can afford — are creeping upward, too. How have lending standards changed, and how much tougher is it these days to qualify for home loans?
Talk with academic economists about boom-and-bust real estate and lending cycles for the broader perspective; are consumers with pent-up demand and banks with lots of cash to lend going to be more prudent this time around?
The mortgage lending industry. I’ve noticed an uptick in direct-mail pieces urging refinancing from local brokers and lenders; how’s the mortgage professional career track doing these days? And how are they adapting to mobile technology and other trends? Publications like National Mortgage News and National Mortgage Professional will give insight into industry concerns.
Mortgage data. Familiarize yourself with this gold mine of data from the Federal Financial Institutions Examination Council (FFIEC) website, and put it in your tickler file for next spring when 2012 results are posted. Basically it’s a national aggregation of disclosure data lenders are required by the Home Mortgage Disclosure Act; you can search by state on 2011 results for a really mind-boggling array of information such as denial criteria, income of loan applicants (and by type of loan), remodeling loans, manufactured homes, and so on — most of it sorted by race, sex and income level. Perusing last year’s numbers may give you ideas about trends and issues to pursue — you can sort by metropolitan area for a decent drill-down to your community. And, read this primer by the Consumer Financial Protection Bureau on the HMDA; you can ask specific financial institutions in your area for their disclosure data — which may also help to spot patterns and trends.