Do Rising Home Values Mean Fewer Debt Consolidation Customers?
Could rising housing prices mean a decrease in the number of consumers who need to rely on debt consolidation loans to control their debt? It could, if the latest data from a major housing index is to be believed. Economists keep a close eye on the Case-Shiller Index, a monthly analysis of the top 20 housing markets in the United States. The index is widely viewed as a good gauge of the health of the national housing industry. And the latest report provided some good news: In February, overall housing prices for the 20 markets rose 0.6 percent from the same month one year earlier. This is significant because it represents the first year-over-year increase in the index since December of 2006.
Home Equity Loans on the Rise?
This could hold future ramifications for the debt consolidation industry. If housing prices continue to rise, it could mean an eventual increase in the amount of home equity loans being taken out. And homeowners often use home equity loans to pay down their debt. If they can rely more on these loans, they won’t have to resort to taking out debt consolidation loans. After all, home equity loans often come with far lower interest rates than do debt consolidation loans. The problem has been that so many homeowners across the country today are underwater, meaning that they owe more on their mortgage loans than what their homes are worth. Homeowners in this situation can’t take out home equity loans for the obvious reason that they don’t have any equity built up in their residences.
A Good Omen
The year-over-year rise in housing prices charted by Case-Shiller is a good omen. Yes, it would have been nicer if the increase was higher than 0.6 percent. But an increase is an increase, especially when there hadn’t been one since the last month of 2006. The key, though, will be for the index to measure year-over-year increases on a consistent basis. If that happens, it’s a true sign that home prices are finally on the rebound after a long period of declines.
Alternatives to Debt Consolidation
Many consumers think of debt consolidation loans as loans of last resort. That’s because they lower the credit scores of people who take them out. They also often come with high interest rates and fees. When consumers are done paying down their debt consolidation loans, they’ll have ended up paying more than what they originally owed. During this down economy, more consumers have had to resort to debt consolidation even if it wasn’t their first option. Home equity loans just weren’t available to them because of falling home values. That, though, may change if the Case-Shiller numbers are a sign of a rebounding housing market.