Half of U.S. metro areas with the highest volume of home equity lending in 2024 are in California
With persistently high home prices and prolonged elevated interest rates, some homeowners are tapping their accrued home equity for necessities such as property improvements or debt repayment. Soaring interest rates have significantly reduced refinancing opportunities in the last few years. Escalating mortgage rates, compared with the ultralow rates seen in 2021, significantly curtailed refinancing opportunities.[1] Instead, home equity lines of credit (HELOCs) and home equity loans are increasing in popularity as homeowners seek to tap their accumulated equity.[2]
Home equity grew significantly over the last couple of years, and owners with substantial equity may prefer to keep their existing low rates, thus choosing home equity loans and HELOCs over cash-out refinances.
Figure 1 shows that home equity lending grew to the highest level since the first half of 2008 in the first two quarters of 2024. During that period, lenders originated more than 333,000 new home equity loans totaling about $23.6 billion. Home equity counts and amounts increased by 40% and 69%, respectively, year-over-year in 2024.
Home Equity Loans Grew to the Highest Level Since 2008
Similarly, Figure 2 shows that HELOC activity grew to the highest level since the first half of 2007 in the first two quarters of 2022. However, activity dropped in 2023 and 2024. During the first two quarters of 2024, lenders originated about 671,000 new HELOCs totaling almost $105 billion. HELOC counts and amounts have decreased by 2% and 4%, respectively, year over year in 2024.
HELOC Activity Declined in 2024 After Hitting a 15-Year High in 2022
Home equity loan demand and trends vary nationally by metro area. Figure 3 shows the top 15 metros by home equity loan amount in the first half of the 2024 compared with the same period in 2023. Home equity loan amounts increased in all top 15 metros in 2024 compared with 2023. So far in 2024, Los Angeles had the highest amount of home equity loans, totaling almost $1.88 billion, an increase almost six-fold from 2023. Anaheim, California followed with $1.02 billion, while San Deigo ranked third at $967 million. In general, markets with the largest home price growth over the past few years were among those with the biggest year-over-year gains in home equity loan activity.
For example, it’s worth noting that the California metros saw the most significant home equity loan activity soar. To be noted, in the second quarter of 2024, the average California homeowner gained approximately $55,000 in equity during the past year. In contrast, home equity loan activity slowed in most of the metros in Texas in 2024. Texas posted annual equity losses of $2.6 billion in the second quarter of 2024.
The ongoing housing inventory shortage, coupled with the home equity gain and historically low rates on the first mortgages, makes home improvement a sensible choice for many owners. Given prolonged high home prices, some owners are likely to continue to tap accrued home equity for necessities such as home renovations or settling higher-interest-rate debts.
For an ongoing look at the latest housing market dynamics and trends, regularly check CoreLogic’s Office of the Chief Economist’s home page.
[1] Freddie Mac PMMS 30-Year Fixed-Rate Mortgages.
[2] A home equity loan allows a homeowner to borrow a lump sum amount against the borrower’s home equity value. The rate is locked, and fixed payments are scheduled until the loan is paid off. Whereas a home equity line of credit (HELOC), also secured against the borrower’s home equity value, allows them to access cash as they need and repay the HELOC at a variable interest rate. Instead of borrowing the full amount all at once, it’s a revolving source of funds, which can be tapped as needed. In contrast to a cash-out refinance, home equity loans and HELOCs allow borrowers to take advantage of the low interest rate on their first mortgage while tapping existing equity for necessities such as home improvements or to pay off higher interest-rate debts.
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