Inland Empire homeowners pulling out equity to spend it: latest increase may signal rising trend

TEMECULA – There’s a flipside to the housing affordability “crisis” in communities across California: rising values in the Inland Empire are giving many homeowners a reason to tap into their equity and spend money, according to local data released by the California Credit Union League.

Some Inland Empire-based credit unions are experiencing this trend firsthand as homeowners were increasingly heading into Home Equity Lines of Credit (HELOCs), home equity loans (second mortgages) and cash-out refinance mortgages in second-quarter 2016 compared to the same period a year ago (and prior years before).

These products oftentimes require a certain amount of home equity, which has increased substantially as many existing and relatively-new owners continued paying down their mortgages while real estate prices skyrocketed from 2012-2016.

More than 634,000 homes with mortgages in the Riverside-San Bernardino-Ontario metropolitan statistical area – or 62 percent of 1.02 million mortgages – had at least 20 percent equity as of June 2016, according to RealtyTrac. (There are approximately 1.49 million local residential properties in total)

Meanwhile, data reported by 23 Inland Empire-based credit unions for second-quarter 2016 compared to the year-ago period follows this recent home-equity trend and offers additional insight into the latest homeowner and consumer choices:

Originations (incoming pipeline) for the combined category of HELOCs/home equity loans (second-mortgages) increased 71 percent to $15.3 million.

Altogether, HELOCs and home equity loans (second-mortgages) outstanding stood at $157 million (up from $112 million in 2001 but down from $405 million in 2008).

Originations (incoming pipeline) for first-mortgages declined 21 percent to $17.1 million.

First-mortgages outstanding – which includes cash-out refinances as a subset – increased 22 percent to $359 million (up from $84 million in 2001 but down from $415 million in 2009).

Meanwhile, local credit union membership rose 14 percent to 339,000 individuals. Total lending increased 30 percent, hitting $1.7 billion loaned-out. And total deposits increased 22 percent, hitting a record $2.7 billion.

“The local surge in home-equity lending and cash-out refis reflects a strong national trend in homeowners increasingly remodeling their homes and enhancing their properties,” said Dwight Johnston, chief economist for the California Credit Union League.

He said many neighborhoods across the Inland Empire have enjoyed rapid price appreciation, but some areas still have a relatively large percentage of homes that are underwater or have little equity.

“As more of these homeowners see the light of day with values rising, we’ll see more of this remodeling trend,” Johnston said. “Pulling out home equity seems to have legs and is here to stay, especially since job growth across California remains strong and is supporting household stability.”

You can view the entire Inland Empire report for local trends on first-mortgages, second-mortgages, HELOCs, business loans, new and used auto loans, credit cards, deposit accounts (checking/savings and other) and operational/employee data.

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