Another Sign Of Housing Strength - Taking Equity Out Again:

During the housing boom of the last decade Americans withdrew over $1 trillion in home equity. They did it through cash-out refinances, home equity loans, and home equity lines of credit. The latter allowed them to use their homes like an ATM. They spent the money on cars, televisions, vacations and fancy home upgrades. It was seemingly endless equity, until suddenly that equity was gone.

But the Home Equity Line of Credit (HELOC) is back and millions of homeowners are tapping into their equity to put it back to work. Nationally there has been a 31 percent increase in HELOC's year-over-year.

With home prices up 8 percent year-over-year in December, according to the latest reading from CoreLogic, homeowners are regaining home equity at a fast clip—1.4 million borrowers rose above water on their mortgages through the end of September. That number likely increased as price appreciation accelerated toward the end of the year.

Unlike the equity grab during the housing boom, this is real equity that borrowers are tapping into.  During the housing boom, banks were relaxed in their valuation processes, often times only requiring a statistical valuation or at the most a drive-by-appraisal.  But not this time. After getting burned by their second lien positions, banks are making sure that the equity is really there and are using very strict underwriting guidelines.  The fact that under these new strict guidelines and appraisal scrutiny more and more HELOCs are being approved is another sign that the housing market has some real strength.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) gained +15 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to move sideways.   We had our highest mortgage rates on Tuesday and our lowest rates on Monday. 

Weaker than expected Factory Orders coupled with the political drama out of Spain helped MBS to rally to their highest levels of the week on Monday (Higher MBS = lower mortgage rates).  But the market reversed course on Tuesday after a very robust ISM Services Index release (the services sector accounts for 2/3 of our economy).  This strong economic news caused bonds to sell off.

For the rest of the week, we had worse than expected Initial Weekly Jobless Claims (which is friendly for rates) and a much lower than expected U.S. Trade Balance (which is non-friendly for rates).  As a result MBS traded in a fairly thin range.  Bonds effectively stopped trading early Friday afternoon as traders left NY ahead of the big storm.

20105 - SEARCH ALDIE, VA HOMES FOR SALE

20147 - SEARCH ASHBURN VILLAGE/ASHBURN FARM HOMES FOR SALE

20148 - SEARCH BRAMBLETON/BROADLANDS HOMES FOR SALE

20152 - SEARCH CHANTILLY/SOUTH RIDING HOMES FOR SALE

20164 - SEARCH STERLING/POTOMAC FALLS/CASCADES/LOWES ISLAND HOMES FOR SALE

20175 - SEARCH LEESBURG HOMES FOR SALE

20176 - SEARCH LEESBURG/LANSDOWNE HOMES FOR SALE

Brought to you by:

Harold (Hal)
Senior Loan Officer
Office: 7032798810
Cell: 703-507-1572
hjohnson@embracehomeloans.com

Embrace Home Loans
10306 Eaton Place
Fairfax, VA 22030
NMLS 233808

www.embracehomeloans.com