loanDepot: Nearly Half of Homeowners Expect Equity Gains in 2016
Nearly half of all U.S. homeowners with a mortgage expect their equity to increase in 2016, even though most have already seen equity increases, said loanDepot, Foothill Ranch, Calif.
The survey, conducted for loanDepot by OMNIWEB, said 46 percent of homeowners expect their home equity to increase this year. More than a quarter (27%) of these expect it to rise between 6 to 10 percent. Industry-wide reports forecast 2016 annual price gains to range between 2.3 and 4.7 percent. Only 3 percent of homeowners expect their equity to fall in 2016, while 27 percent expect it to remain the same.
The survey also found that while 57 percent of homeowners believe their home’s value has appreciated in the past three years, the majority (80%) underestimate the amount of value their home has gained throughout the housing recovery. Of those who believe their home’s value has increased since 2013, one in four (27%) believe it increased between 1 and 5 percent since 2013.
“Homeowners who bought during the housing boom are regaining equity many thought was lost forever, yet too many are not aware of the equity they have gained or they are unclear about how to determine changes in their equity,” said Bryan Sullivan, chief financial officer of loanDepot. “People who bought after the housing boom when prices were low are realizing homeownership can be a great investment and an asset that they can now leverage through equity to realize many dreams. Whether they choose to leverage their home equity now or reserve it for future needs, millions of homeowners have choices today not available just a few years ago.”
The survey said homeowners who bought before and during the boom–and watched their equity wash away from 2007 to 2009–have very different views on equity compared to those who bought when prices were lower, post 2009. More buyers who purchased after 2009 (64%) believe their home has gained value since 2013 compared to 58 percent of pre-2009 owners.
The survey also reported more buyers who purchased after 2009 (50%) expect to gain more equity this year compared to 43 percent of pre-2009 buyers. Newer buyers may be more bullish on equity gains because they did not experience drastic losses of equity like their pre-2009 counterparts. More pre-2009 owners (65%) believe they have adequate equity now to take out a home equity loan compared to just over half (52%) of post-2009 buyers.
Post-2009 owners are more conservative on using their equity, the survey said. A majority of owners from both periods say they have always been conservative about accessing their equity, but post-2009 buyers are more so by a margin of 62 to 55 percent.
Additionally, the survey said three of five homeowners (59%) report they now have enough equity to take out a home equity loan, while nearly one in seven (16%) do not know how much equity they would need to qualify for a loan. Another nine percent do not know how to calculate the equity in their home. Only 16 percent of all owners with a mortgage, including 19 percent of post-2009 owners, say they do not yet have enough equity to take out a home equity loan.
loanDepot also reported home remodeling (39%), consolidating high interest rate debt or credit cards (29%) and saving for retirement (18%) top the list of ways owners would use funds from a home equity loan. Nearly one in five (19%) said they have no concerns about accessing their equity as long as they stay current on their mortgage. Just over five percent (5.7%) do not believe keeping a high level of equity in their homes would protect them from another housing crash, while three percent say they have waited a long time to get cash back from their homes.
