Americans are persistently told that the U.S. economy is gaining strength, yet there are many indicators that appear to contradict that rosy analysis.
The housing market is an area of mixed indicators. Some prices are up, but other issues remain worrisome.
One such indicator concerns “HELOCS.” According to a TD Bank description, a HELOC is “A home equity line of credit (often called HELOC and pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower’s equity in his/her house (akin to a second mortgage).
The Wall Street Journal reports that “A decade after homeowners used a soaring real-estate market to go on a borrowing binge against their own properties, many are now falling behind on payments, threatening to leave banks on the hook for hundreds of millions of dollars…borrowers who signed up for HELOCS in 2004 were 30 or more days late on $1.8 billion worth of outstanding balances just four months after principal payments started kicking in”
Mortgage expert Chris Cabanillas notes that “It’s a real concern and something we have been warning about for a few years.”
There are also other factors hampering the housing market, as well. The Wall Street Journal also notes that “many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing.”
Many of those who do own homes face an uncertain future. CNBC reports that “Of the approximately 952,000 borrowers who are 90 or more days past due on their monthly payments, but not yet in foreclosure, 62 percent have already been through some form of home retention program,” so the chances of a successful outcome are not good.
Selling will not be a viable option for many, according to an Atlantic magazine analysis. “Across America about 5.4 million homes are still upside-down on their mortgages…in some areas, negative equity is actually deepening.”
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While providing some optimism, (“Consumer attitudes about the housing market showed marked improvement last month, strengthening the case for a lift in housing activity this year”) the May Fannie Mae survey pointed out cause for concern.
“Those who think it would be easy to get a home mortgage decreased by 2 percentage points to 50 percent, while those who think it would be difficult remained at 46 percent.
” The share of respondents who say the economy is on the right track decreased by 4 percentage points to 38 percent, while those who say the economy is on the wrong track rose by 3 percentage points to 52 percent.
“The percentage of respondents who expect their personal financial situation to get worse over the next 12 months rose to 12 percent.”
The Federal Reserve Bank of New York has also surveyed the housing market. Similar to several other studies, it provided generally favorable indicators, but there were also negative trends regarding home prices and the value of their homes.
“Among homeowners, the expressed likelihood of investing in improvements to the home has declined somewhat relative to last year. Most renters report that they would rather own than rent if they had the necessary financial resources; as in last year’s survey, a majority of them believe that it would be difficult to obtain a mortgage, although responses suggest a slight easing in perceived credit access.
“Home Price Expectations Survey respondents were asked for the current value of a typical home in their zip code, and what they expected the value of that home to be in one year. and in five years. On average, respondents expected home prices to increase by 4.4 percent over the next twelve months—a rate 0.1 percentage point higher than the average rate in the 2014 survey and remarkably close to the mean forecast of 4.37 percent in a January 2015 survey of housing market experts conducted by Pulsenomics. The median expectation in the 2015 survey of 3.0 percent, however, was lower than the 2014 median of 3.3 percent. With regard to longer-term expectations, the average (median) expected annualized change in home prices over the next five years was 2.9 percent (2.4 percent). These figures were slightly lower than the corresponding figures in the 2014 survey, where the mean (median) expected annualized change in home prices over the longer horizon was 3.1 percent (2.6 percent). Thus, overall, respondents expected home price growth to continue, but at a slower pace at a horizon beyond one year.”