HELOCs are no longer the popular commodity they once were. Now that tapped-out homeowners realize that property values won’t “always go up,” they’re more reluctant to apply for new lines.

The recession has caused fewer homeowners to apply for HELOC loans and more people to curtail their spending (presumably, some of those spending reductions will help current HELOC holders pay off their existing lines).

The New York Times reports:

“The United States economy shrank at its fastest pace in a quarter-century from October through December, the government reported on Friday, as consumer spending and business investment collapsed, signaling more economic contraction in the months ahead…

And American consumers, who took on home equity loans and large amounts of credit card debt to finance their lifestyles earlier in the decade, curtailed their spending for a second consecutive quarter. Consumer spending, which typically accounts for two-thirds of economic growth, fell 3.5 percent in the quarter, after decreasing 3.8 percent in the third quarter.”

There are certainly legitimate uses for a home equity line. However, reckless spending is coming back to haunt homeowners who withdrew without considering the future.

See Also:

Is a HELOC Right for You?

Printable HELOC Comparison Worksheet

5 Financially Sound Ways to Use Your HELOC

Tags | Heloc, heloc crisis, home equity line of credit