ONTARIO, Calif. (3/17/14)--California and Nevada credit unions may want to focus on real estate lending--particularly home equity lines of credit (HELOCs)--given the positive outlook for housing, according to the chief economist for the California and Nevada Credit Union Leagues.
HELOCs and home equity loans is a stand-out sector, Dwight Johnston said, adding, "With the dramatic improvement in home prices in California and Nevada, the pool of eligible borrowers has increased exponentially. If jobs and wages continue rising, homeowners are more likely to borrow against their homes for improvement" (In the News March 11).
He cautioned, "This won't be similar to the boom days. Credit unions will have much more conservative loan-to-value maximums, but the growth potential is there."
HELOCs now make up only 12% of all credit union loans in California and Nevada, down from the 2006 level of 17.28% and 40% less than their peak of more than $35 million in 2008.
Nationally, home equity loans stood at 6.3% of all loans as of January, according to data from the Credit Union National Association, down slightly from 6.6% a year prior and 6.7% in 2012.
Johnston noted that the small step upward in the last quarter of 2013 "could be just the beginning." Compared with the peak number of 550,000, HELOCs came in at 48,000 in 2013. That in itself was a 48% increase from 2012, according to DataQuick.
"There is room to grow," Johnston said. For every mortgage loan a credit union made on a home purchase from 2008 or 2009 until early 2013, that credit union has a member who likely holds a significant amount of equity built in. "That's a great pool to tap into," he said.
Auto lending is solid but will roughly be equivalent to its 2013 level, Johnston said. Wage gains should lead to greater demand for credit cards and personal loans.
"I would also expect to see greater demand for personal loans," Johnston said. "This is borne out by a surge in person-to-person loans on various websites--loans that should be going to credit unions. But credit unions seem to have lost interest in the 'old-fashioned' loans. This might be the time to get reacquainted."