We Aren't Buying Many New Homes, We're Borrowing Against the Ones We Already Own

Compared to 2012 and 2013, mortgage activity was pretty subdued in 2014. Last year, consumers opened $1.3 billion in new mortgages, down from $1.8 billion in 2013. It wasn’t unexpected — year-over-year mortgage originations have been declining since the third quarter of 2013 — but it doesn’t paint a rosy picture of the supposedly recovering housing market.

At the same time, originations increased from the fourth quarter 2013 to fourth quarter 2014 (from $317 million to $340 million), the first year-over-year increase since things started to slide in 2013. Mortgage delinquencies have gone down, as well, reflecting positively on consumers’ ability to better manage their finances in the wake of the housing crisis.

People may not be buying homes at the rate they were in 2012 and 2013, but existing homeowners have started taking advantage of growing property values. More home equity lines of credit were taken out in 2014 than have been in years: In the fourth quarter, originations were up $11 billion from the fourth quarter of 2013, a 31% increase. Overall, consumers opened $134 billion in HELOCs last year, up from $108 billion the year before.

Before the housing crisis, people went overboard with HELOCs, often using them to buy unnecessary or extravagant items. HELOCs collapsed with the market, and as both emerged from the miserable pit known as the recession, consumers seem to be approaching them with more caution (at least, that’s what the continually declining delinquency rates suggest).

Despite the bad rap HELOCs got as a result of the crash, they can be useful tools. Examples of responsible ways to use HELOCs include home improvements, education expenses or paying off debts that have higher interest rates. Of course, you’re putting your home on the line to make those financial moves, so it’s not one to make flippantly. Carefully weigh your options before using a HELOC to reach your goals, and keep an eye on your credit standing to make sure you’re in a good enough position to open one, if you so choose. You can track your standing by getting your free credit report summary on Credit.com, with updates every month.