Will Home Equity Ever be the Same?
By: NIck Deonas
As Real Estate sales continue to plunge, so go the values of our present Real Estate investments. Will it ever come back and can we once again take advantage of our investments? I think it will be many years before we see a return to the “good ole” days, in fact, I am not anticipating a return within my lifetime. I don’t want to be the bearer of bad news, but I truly believe going forward we will all learn to re-think the way we are doing business, and make the necessary adjustments to live within our means.
Remember the good ole days when a homeowner could simply pick up the phone, call their local bank and request a home equity line. Those days are rapidly coming to a close. No longer are the banks jumping at the chance to issue HELOC’s (Home Equity Line Of Credit) but they are now either freezing, or reducing many that are already on the books.
For the past ten years or so, the average American homeowner became comfortable using their homes as an ATM machine. If they owed let’s say, $100K on their homes and it appraised for $150K then they would get a $50K HELOC. That money was always a comfort zone, and the availability to always “live the good life”. The average family always had “money in the cookie jar” with this line of credit. At anytime they simply would write a check for the things that they normally would not be able to afford.
As we find ourselves in this Real Estate downturn, and values are constantly falling, our “cookie jars” are drying up. To make matters worse, the banks are not issuing, or renewing HELOC’s as freely as they once were. Banks today are involved in a massive finger pointing process of blame. As property values continue to fall, people are now realizing that they are now being required to “live within their means”. For many this is proving to be a taste of reality, never before experienced.