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Dust off those HELOCs Home improvement sales up
MADISON, Wis. (9/27/12)--Consumers are making more purchases of home goods, according to a study released Tuesday by IBM Smarter Commerce. Credit unions can take advantage of this trend by promoting home equity lines of credit (HELOC) for home improvements.

The biggest retail gains during the back-to-school shopping season were home goods purchases which increased 30% in July and more than 25% in August over their respective months in 2012, according to IBM. Home goods include anything from house paint to appliances or furniture.

"The focus on buying items for the home isn't surprising--with home affordability near all-time highs home sales have been clipping along at a fast pace over the past few months," said Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics. "Both July and August new home sales increased at a nearly 30% year-over-year pace and both July and August existing home sales increasing at roughly 10% year-over-year," he told News Now.

The home improvement industry is a $200 billion a year business, according the About 85% of the nation's homes were built before 1980 and will need frequent maintenance, according to the website.

Almost 70% of homeowners had home improvement plans for 2012 and were planning on spending an average of $3,500, which is an increase of $100 from 2011, according to the American Express 2012 Home Decision Report. A low percentage of people buying, an increased percentage of people remodeling, and an increase in spending means homeowners are trying to add value to their homes because they are planning on staying in them longer, according to the report.

Home equity lines of credit accounted for 6.9% of credit union loans in July 2011, compared with 7.6% in August, according to CUNA statistics.

The purchase of homes and home goods should help to boost credit union loan growth, but will not necessarily translate to significant increases in HELOC and second mortgage balances, Schenk said.

"While home prices are increasing, the increases overall have been modest," he said. "For example, while the Case-Shiller home price index has increased in each of the past six months, prices are up only 1.3% year-over-year and they remain 23% lower than at the beginning of the economic downturn.  Thus, for many, tapping home equity remains difficult. More generally, having just lived through a crash caused by over-borrowing on home equity, it seems unlikely that many have the appetite to return to those behaviors any time soon."

Some credit unions are running HELOC promotions.

IBM Southeast Employees FCU, Boca Raton, Fla., is offering annual percentage rates (APR) as low as 4% on HELOCs with no closing costs, and no or application or annual fees. HELOC holders can make interest-only monthly payments. Approved applicants can enter a drawing to win a $100 Home Depot gift card.

MC FCU, Danville, Pa., is offering a $50 gas card to approved HELOC applicants and waiving the $99 application fee. The credit union offers an APR as low as 4.5% on HELOCs.

Cyprus CU, West Jordan, Utah, is offering a promotion rate of 2.99% for the first since months on its HELOC product, with rates increasing to as low as 4% after six months. No fees are required during the promotion.


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