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Home Equity Loans Increase As Housing Bubble Enters Final Phase

Home equity loans are back as home prices rise.

“Borrowers Tap Their Homes at a Hot Clip” blurted a recent Wall Street Journal Headline.

It was bound to happen with rising home prices.

Didn’t get a raise? or working two jobs to make ends meet and need cash? If you own a home you may be in luck. That same old home that you bought years ago is worth more today than it was last year. Your house hasn’t become more productive and most likely has depreciated, but it’s worth more and that means you can margin your used home to cash in.

Return of Home Equity Lines of Credit (HELOCS) and Lower Lending Standards – Deja Vu Redux?

With year over year double digit percentage home price increases, an increase in HELOCS and lower lending standards on the way, all the elements are in place for another housing bubble.


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TwelveOhOne's picture

I'll take a loan if I have the capital, and can put it into BTC

Loans max out (credit card loans) at around 25%, generally (state laws differ). Mortgages are generally much lower.

But even at 10%, I'd take a mortgage and invest it 100% into Bitcoins.

Wait two years, while selling just enough each month to make a payment (or not if I have other income), and pay off the house and buy an island.

I love you. I'm sorry. Please forgive me. Thank you.
http://fija.org - Fully Informed Jury Association
http://jsjinc.net - Jin Shin Jyutsu (energy healing)

There are plenty of crypto

There are plenty of crypto currency competitors now and the barrier to entry is relatively low.

What is special about bitcoin beyond simply being the first to market and/or the most well known? There are new crypto currencies that do exactly the same as bitcoin + more (some with real economic productivity benefits).

Bitcoin can probably be unseated as #1 just like MySpace was or Friendster before it.


TwelveOhOne's picture

See my reply to IMissLiberty

Just because "coin X" can easily be made, doesn't mean it will obtain the market share or "miner share" that Bitcoin has.

If there aren't miners, a new coin dies. This has happened.

You're right, Bitcoin can probably be unseated -- the amount of effort to do so, though, is not trivial. (Perhaps the NSA could do it a year ago; these days, even they may not have enough computing power!)

I love you. I'm sorry. Please forgive me. Thank you.
http://fija.org - Fully Informed Jury Association
http://jsjinc.net - Jin Shin Jyutsu (energy healing)

taking on debt is a very risky thing to do

I would advise against it

TwelveOhOne's picture

I would as well, in most situations

A situation in which I have a very good idea of the outcome, though, is a situation that I might take some risks.

I love you. I'm sorry. Please forgive me. Thank you.
http://fija.org - Fully Informed Jury Association
http://jsjinc.net - Jin Shin Jyutsu (energy healing)

Gold/Silver Maybe - Bitcoin, No

Bitcoin is a software program.

Unless governments step in and forcefully prohibit competition, there's nothing to stop people from introducing new competition (and even then...).

What do you think? http://consequeries.com/

TwelveOhOne's picture

"New competition"? There's such thing as first mover's advantage

All other cryptocurrencies are measured against Bitcoin.

No other cryptocurrency has Bitcoin's breadth and depth.

New competition could come about -- but they'd need a significant amount of effort in order to reach Bitcoin's pinnacle.

Not saying it can't be done; Facebook took over from MySpace took over from Geocities.

But people aren't abandoning Bitcoin; they're taking new features added to new coins and implementing them.

There are benefits to alternative non-fiat systems; there are also drawbacks. You can easily remember a pass-phrase and take your Bitcoins to another country solely in your brain. Can't do that with the metals. (And metals have advantages that bits don't; it's not either/or.)

I love you. I'm sorry. Please forgive me. Thank you.
http://fija.org - Fully Informed Jury Association
http://jsjinc.net - Jin Shin Jyutsu (energy healing)

Garan's picture

Your Home is Not an Asset

Assets produce income, year after year.
Homes do not.
Banks list a home as an asset, yet it is an asset to them, not the home owner.

Homes are necessities and the most you can hope for is to eventually pay less for a place to live, compared to renting from someone else.

Reading articles on home finances becomes a little more difficult when the articles are steeped in this misperception of your home being an asset, yet you are less likely to be misled by generally accepted false perspectives.

The only other thing I'll mention is that a higher price does not necessarily mean it is worth more. Is the fruit in your refrigerator worth more because the price went up? Nope. It just costs more. You are the consumer.

As everyone knows and should remember, inflation is also a devaluation of the dollar. There is no advantage to selling part of your house, so to speak (in the form of a loan against your house), when what you purchase has gone up in price as well. If you can't sell your supposed price-inflated house to buy a better one at an equal or lesser price, the situation is no different than if all the homes did not inflate in purchase price.

Those are my first thoughts when reading this article.

Location of the house is also important

While it is true that theoretic value of the house increases with inflation, in practice values of the house do not necessarily increase equally. That means there will be houses that will appreciate more than average and there will be houses that will actually lose value.

This explanation does not simplify nor explain, but, nevertheless, an important detail to remember.

Engage in Secure Exchange

Garan's picture

The idea is to have income-producing possessions.

The definition of 'asset' that I am supporting makes a distinction between income-producing possessions and non-income producing possessions.

The argument that gold is an asset also holds for anything a person possesses that could be sold for money.
However, a definition of 'asset' that includes the ownership of non-income producing possessions can lead to two people having completely different financial pictures/outcomes.
One will get to keep their income-producing possessions indefinitely, while receiving income. Another may have to sell their assumed 'asset' in order to live off of it, eventually having no more left to sell.

Also, a person who purchases income-producing possessions, may use the extra income to purchase more income-producing possessions, thereby accelerating their accumulation of what I call 'assets'.
Outside of being a successful trader/speculator, that can't be done with non-income producing possessions.

Overall, the idea is not which definition of 'asset' is correct.
The idea is, which definition will serve you the best.

For some (maybe most) people, purchasing gold may be better than purchasing stocks, yet it is still a job of speculation.

When it comes to a home. If you are unwilling to sell or simply need it, then it can't act as (what most people call) an 'asset'.

Those are the views under which I operate.

18.8% of homeowners with mortgages are still underwater.

About 1 in 5 people who have mortgages have no equity to tap.

[F]orce can only settle questions of power, not of right. - Clyde N. Wilson

yep and they can't sell or move either

the goal is to boost all home prices so everyone can borrow against their homes!

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Here is the disconnect

Sellers think it's a great time to sell but buyers think the economy is no good! http://www.inman.com/2014/06/09/buyers-concerns-about-the-ec...

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