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San Diego County: Homeowners Extract Equity to Spend

Latest Increase May Signal Rising Trend

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

Some credit unions based in San Diego County 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.

Approximately 525,000 homes with mortgages in the San Diego-Carlsbad metropolitan statistical area—or 74 percent of approximately 713,000 mortgages—had at least 20 percent equity as of June 2016, according to data supplied by RealtyTrac. (There are 1.16 million local residential properties in total)

Meanwhile, data reported by 18 credit unions in San Diego County 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 in spending and banking:

  • Originations (incoming pipeline) for the combined category of Home Equity Lines of Credit (HELOCs)/home equity loans (second-mortgages) increased 14 percent to $207 million.
    • Altogether, HELOCs and home equity loans (second-mortgages) outstanding increased 6 percent to $910 million (up from a low of $837 million in 2014 but down from $1.3 billion in 2008).
  • Originations (incoming pipeline) for first-mortgages decreased 33 percent to $479 million.
    • First-mortgages outstanding—which includes cash-out refinances as a subset—increased 10 percent to $6.5 billion, hitting a record dollar amount (and rising 49 percent from a low of $4.3 billion in 2011)
  • Meanwhile, local credit union membership rose 8 percent to a record 988,000 individuals (18 credit unions). Total lending increased 16 percent, hitting a record $11.6 billion loaned-out. And total deposits increased 8 percent, hitting a record $14.7 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 San Diego County have enjoyed rapid price appreciation, but some select areas still have a 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 San Diego County 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.

*Percentage increases are 2Q 2015 – 2Q 2016 and reflect dollar amounts.