Kristen Verga August 8, 2023

Newsletter - August 2023

Americans’ personal savings have fallen to lower levels than before the pandemic began Barchart reported in a July tweet. The financial data company reported losses of 5.5 trillion since April of 2020.

The significant drop likely correlates to inflation and overspending after the pandemic. While families were able to reduce their expenses in 2020 due to restrictions on travel, events, and more, now consumers are finding it more difficult than ever to not only pay basic bills, but also save for their futures.

Inflation levels reached historic levels in mid-2022 peaking at 9.1%. Costs of everything from bread to vehicles surged upward. Inflation rates have since curbed back down in 2023 to 3%, however, last year’s effects are still impacting Americans’ wallets today.

According to Insider, the U.S. Central Bank has increased benchmark borrowing costs by 500 basis points since early 2022 to bring inflation down to a target of 2%.

If Americans drain all their savings this year, it could lead way to a recession. Student debt could also contribute to a heavy economic downturn as loan payments begin.

With fewer options to gain additional income and avoid credit card debt, homeowners are looking into drawing on home equity lines of credit to replenish accounts. Technavio said in a recent report that the Global Home Equity Lending Market size is estimated to grow by about 35 million between 2022 and 2027, accelerating at a CAGR of 3.81%.

Contributing factors to the home equity lending market trend include massive increases in home values, expanding residential population, and the need for decent housing and infrastructure.

Due to the surge in the desire to relocate and the need for more home space, home prices doubled and even tripled in some locations such as Miami and Los Angeles. The recent general shortage of housing also played a role in causing the real estate market to quickly shift.

According to Bloomberg, home values grew by more than $100,000 in 11 markets. Between December 2020 and December 2021, the median U.S. home grew in value by $52,667. The top three cities that had the highest single-family home increases from May 2020 to May 2022 were Cape Coral, FL at 72%, Austin, TX at 69%, and Boise, ID at 67%.

The intensely growing population has also led to the rise in equity. With more families needing stable living spaces, the value of owning a home has gone far beyond simply acquiring a financial asset. Post-pandemic needs for remote work spaces and flexible work locations have allowed Americans to expand their options in living any place they want.

“This has encouraged more home buyers to opt for larger homes, which has increased housing demand,” Technavio stated. “Homeowners are looking to update their spaces and invest in the locations where they spend the majority of their time because so many Americans work from home, exercise at home, and attend school from home. Many people who have just bought a house are trying to figure out how to make it feel more like a home, like buying a new couch to fit in the new living room. Such factors are expected to increase the demand for home equity lending during the forecast period leading to growth in the regional home equity lending market.”

Some of the challenges families may face when it comes to accessing funds from home equity are enduring a long and tedious approval process and reaching the necessary requirements like debt to income ratio, good credit scores, and proof of income Yahoo! Finance says.

Overall, there will be an increasing need for reliable lenders with reasonable rates so that Americans can survive the oncoming economic challenges and re-supply their savings accounts.

Be prepared for the flood of HELOC applications coming soon.  Engage with Blue Streak Docs for your title search and due diligence requirements on properties anywhere in the US!

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