Home Value Highest Since ’07 as U.S. Houses Make Cash – Bloomberg 03-26-13

Salient to Investors:

Real estate equity jumped 25 percent in 2012, the biggest increase in 65 years. Home values rose to the highest levels since 2007.

Shaun Richardson at Icon Advisory said mortgages originations should rise 10 percent in 2013. The Fed said 6 percent of lenders eased equity-mortgage standards at the end of 2012, the most in 18 months.

Greg McBride at Bankrate said lenders are returning, but not to the wild, wild West during the real estate boom – lenders usually require borrowers to retain at least 20 percent equity.

Stuart Feldstein at SMR Research said banks are beginning to view equity lending as a potential source of income, rather than losses, and improvements in home prices and credit quality over the next 2 years should put profit back to the pre-bust level of 1 percent to 1.5 percent return on assets. Feldstein said banks retain most of their equity originations on their books, unlike first-lien mortgages – only 2 percent are securitized on the secondary market.

There are two kinds of home-equity mortgages. Lines of credit, or Helocs, are adjustable loans tied to the prime rate, whose average rate last week was 5.11 percent. And closed-end loans, or He-loans, which are usually fixed-rate junior mortgages or first liens used to refinances, whose average rate was 6.13 percent last week.

Craig Focardi at CEB TowerGroup said owners watching their equity rise will be more likely to borrow and to spend and look for another house – home equity is a financial cushion to the average person’s balance sheet.

The Bureau of Economic Analysis said real estate added to GDP in 2012 for the first time since 2005. The median economist expects the economy to grow 1.9 percent in 2013.

Read the full article at http://www.bloomberg.com/news/2013-03-26/home-value-highest-since-07-as-u-s-houses-make-cash-mortgages.html

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