DS News - HSBC

46 HELOC WITHDRAWALS HIT A LOW Homeowner equity grew 7 percent, translating to more than $380 billion in the first quarter of 2018, according to the latest Mortgage Monitor Report released by Black Knight. In fact, this is the largest single quarter growth since Black Knight began tracking this data in 2005. Yet, homeowners with mortgages withdrew only $63 billion in equity via cash- outs or home equity lines of credit (HELOCs), representing a 7 percent decline from the last quarter of 2017, Black Knight said. Despite a 16 percent increase in equity over a one-year period, just 1.17 percent of the total equity available was withdrawn over the quarter, representing the lowest share in four years. "Collectively, American homeowners now have $5.8 trillion in equity available, yet only 1.17 percent of that total was withdrawn in the first quarter of the year," said Ben Graboske, EVP of Black Knight's Data and Analytics division. "Somewhat surprisingly, even though rising first-lien interest rates normally produce an increase in HELOC lending, the volume of equity withdrawn via lines of credit dropped to a two-year low as well." According to the report, cash-out made up 70 percent of all refinance transactions in Q1, with 45 percent of homeowners who took a cash-out refi having to increase their rate to do so. Cash-out refi withdrawals were also up 5 percent from last year compared to HELOC withdrawals, which slipped 1 percent during the period. e report concluded that these numbers pointed out the fact that as short-term rates rose, traditionally good potential HELOC borrowers were turning to cash-out refis due to their competitive rate advantage. So what's driving the decline of HELOCs? "One driving factor in the decline of HELOC equity utilization is likely the increasing spread between first-lien mortgage interest rates—which are tied most closely to 10-year Treasury yields—and those of HELOCs— which are more closely tied to the federal funds rate," Graboske said. "As of late last year, the difference between a HELOC rate and a first- lien rate had widened to 1.5 percent, the widest spread we've seen since we began comparing the two rates 10 years ago. e distance between the two has closed somewhat in Q2 as 30-year mortgage rates have been on the rise, which does suggest the market remains ripe for relatively low-risk HELOC lending expansion." e Federal Reserve raised its target interest rate again at its June meeting, and according to Graboske, that would also increase the standard "interest rate on HELOCs in Q 3 2018." FANNIE WEIGHS IN ON HOMEBUYER SENTIMENT American homebuyers were feeling a little less positive about buying a home, but homeowners were a little more positive about selling one in June, according to Fannie Mae. e agency's June Home Purchase Sentiment Index (HPSI) dropped 1.6 points from May. at brings the index total to 90.7. However, June's numbers are down compared to April's and May's HPSI totals, which were the highest on record. e index is up 2.4 percent from a year ago. Overall, the index has been on a fairly steady climb since 2011, a few drops aside. And despite the dropoff from May, June's numbers seemed generally cheerful. Also, the net share of respondents who said now is a good time to buy a home remained unchanged in June, and the net share who said now is a good time to sell increased 1 percent. Compared to two years ago, sentiment toward selling is dramatically higher. In June of 2016, the share of respondents bullish on it being the best time to sell was 18 percent. e previous month it was 47 percent. Meanwhile, the share who said it's a good time to sell has been largely level, right around a steady 30 percent, these past two years. ese numbers suggest to Fannie Mae's SVP and Chief Economist Doug Duncan that the index might have reached its plateau point. "Tight supply and lackluster income growth continue to weigh on housing activity, and consumer expectations for home price growth over the next 12 months have moderated," Duncan said. "However, consumers expressed increased optimism about the direction of the economy and their personal financial situations over the next 12 months, with both measures matching previous survey highs this month." Americans were also less worried about losing their jobs. e net share of those worried dropped 2 percent (to 76 percent), while those saying they made a lot less money than a year ago also dropped 2 percent (to 19 percent). Four percent fewer people said they believe mortgage rates will go down over the next year, and 3 percent fewer said they think housing prices will keep climbing through next year.

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