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    Are Riverside Homeowners Using Their Homes as ATMs Again?

    Real Estate is not an ATM - DeBonis Team
    The Riverside, CA real estate market has experienced strong appreciation in home values, which as a result has increased home equity levels tremendously in the last 8 years. We are beginning to see the number of “cash-out” refinances approach numbers that were last seen during the previous crash, many are concerned that we may be repeating last decade’s devastating mistake.

    In reality, after further analyzing the numbers they show that homeowners are being much more responsible with their home equity this time around.

    What happened then…

    When real estate values began to surge last decade, people started using their homes as personal ATMs. Homeowners would refinance their houses and convert their equity into instant cash (known as “cash-out” refinances). Because homes were appreciating so rapidly, many homeowners tapped into their equity multiple times.

    This left homeowners with little-or-no equity left in their homes, so when prices started to fall many homeowners found their houses in a negative equity situation (where the mortgage amount was greater than the value of the home). When some of these homeowners saw that there was no value left in their houses, they just stopped paying their mortgages altogether.

    Banks eventually foreclosed on those homes and the foreclosures drove prices down even further and put more homes in the negative equity category. This cycle continued, leading to the worst housing crash in almost one hundred years.

    What’s happening now…

    Again, Americans are seeing their home equity grow. Today, over 48% of all single-family homes in the country have over 50% equity, and yes, some families are tapping into that equity. However, this time around, homeowners are not making irresponsible decisions. According to the latest information from Freddie Mac, the total equity being “cashed out” is a fraction of what it was leading up to the crash. Here are the numbers:

    Home Equity cashed out chart - DeBonis TeamBottom Line

    The carelessness that accompanied the increase in equity prior to the last real estate market crash does not exist today. That is what makes the current housing market much more secure than the one we had heading into 2008.

    If you would like additional information regarding todays constantly changing Real Estate Market, Contact The DeBonis Team for a Free Consultation. Contact Us!  

     

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