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HELOC Trends in 2023: A Comprehensive Overview

Total HELOC Balances Increased 6.6% in 2023

Home equity lines of credit (HELOCs) have seen a significant rise in 2023, with total balances increasing by 6.6%. This marks the second consecutive year of growth in HELOC balances, reflecting a renewed interest among homeowners in leveraging their home equity.

What You’ll Need for a HELOC (Besides Equity)

To qualify for a HELOC, homeowners need more than just equity. Lenders typically require a debt-to-income ratio (DTI) under 43%, a solid credit history, and a good credit score. The average HELOC limit in 2023 was $117,598, with homeowners using about 36% of their available credit.

HELOC Credit Limits Are Up in 2023

The average credit limit for HELOCs has increased by 1.7% in 2023, reaching $117,598. This increase allows homeowners to access more funds for home improvements, debt consolidation, or other financial needs.

Younger Homeowners More Likely to Be Tapping Home Equity

Homeowners born after 1965 are more likely to tap into their home equity compared to older generations. This trend is driven by younger homeowners’ needs to finance home improvements and other expenses. For instance, Millennials and Generation X have seen their average HELOC balances increase by 5.5% and 5.3%, respectively.

HELOC Balances Climb in Most States

In 2023, HELOC balances increased in 45 states and the District of Columbia. States like Hawaii, Colorado, and South Dakota saw the most significant increases, reflecting the tight housing markets and rising home values in these areas.

States Where the Average HELOC Balance Grew the Most

Hawaii, Colorado, and South Dakota experienced the highest growth in average HELOC balances, with increases of 13.7%, 10.5%, and 8.9%, respectively. This growth highlights the increasing reliance on HELOCs for financing home improvements and other expenses.

States Where the Average HELOC Balance Shrank

In contrast, states like California, Illinois, and New York saw a decline in average HELOC balances. This trend may be due to the high cost of living and other economic factors in these urban centers.

HELOCs in 2024: Almost Ready for Prime Time?

As we move into 2024, the demand for HELOCs shows no signs of slowing down. Mortgage lenders are streamlining the application process using AI-powered property valuations and consumer-permissioned income verification. However, borrowers should be patient, as larger loan amounts and lien recording can take time.

At O1ne Mortgage, we are committed to helping you navigate the complexities of HELOCs and other mortgage services. Call us today at 213-732-3074 to discuss your options and find the best solution for your financial needs.

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