Rising home prices, especially in cities located in the West, are helping to boost origination levels for home-equity lines of credit. A shift from refinances to purchase financing is a good sign for the housing market.
HELOC originations during the second quarter of this year soared compared to the prior three-month period, with volume up 30 percent from the first quarter.
The story was the same for year-over-year HELOC production, which was also up 30 percent compared to the second-quarter 2012.
Experian, which reported the statistics Thursday in a quarterly analysis examining real estate trends, said that the increase was “the first major jump of this kind since the recession.”
Thanks to home price appreciation in cities like Las Vegas, Los Angeles, Phoenix and San Francisco — the increase in HELOC production was greatest in the West.
HELOC originations in the Northeast were also strong, in line with historical activity.
“We continue to see a very conservative lending approach, with nearly 90 percent of HELOCs still coming from super-prime and prime consumers,” Experian Decision Analytics Senior Product Manager and Business Consultant Alan Ikemura said in the report. “However, there is an opportunity for more people to actually participate in getting a home-equity line because of home price improvements.
“This trend is likely to continue as we see more homeowners move into a better equity position.”
Compared to a year earlier, overall second-quarter 2013 residential loan originations were up 10 percent.
While Experian didn’t report the change between the first and second quarters, industry estimates ranged from a 1 percent decline to an 11 percent gain.
Experian’s estimate of the year-over-year increase was lower than most other industry estimates, as shown in the table below.
| Source | Q2 2013 | Q1 2013 | Change Q1 to Q2 |
Q2 2012 | Change 2012 to 2013 |
| Experian | na | na | na | na | 10% |
| Fannie Mae | $557 | $503 | 11% | $474 | 18% |
| Freddie Mac | $461 | $440 | 5% | $470 | -2% |
| Mortgage Bankers Association | $494 | $482 | 2% | $395 | 25% |
| Mortgage Daily | $502 | $505 | -1% | $403 | 25% |
Experian said second-quarter origination volume was greatest in the metropolitan areas of Las Vegas, Phoenix, Atlanta, Miami and Tampa, Fla.
Looking at just refinance production, U.S. volume fell 7 percent between the first and second quarters of this year.
At the same time, a 29 percent increase from the first quarter was recorded for home purchases.
“The key statistic in the real-estate market is the change in the ratios of refinances versus home purchases, with purchases making up a much greater proportion of the total origination volume,” Ikemura said.
The report went on to highlight how the share of distressed property sales dropped to 15 percent from 25 percent a year earlier.
At the same time, conventional existing sales were up by nearly a third.
“Combine this with strong growth year over year from new home sales at 38 percent, and it is easy to see that the recovery could be coming from purchases,” the report said.
