Looking ahead at what’s coming

In looking ahead at what’s out there and what trends might be coming, there are a few things that are definitely worth keeping an eye on.

Heloc’s, or home-equity lines of credit, obtained by homeowners between 2004 and 2007 will be resetting soon. These lines of credit typically have an initial 10-year period when the borrower pays only interest on the loan. After the 10-year period, the loan resets and the borrower must pay both interest and principal on the outstanding balance.

The Office of the Comptroller of the Currency, which regulates banks, projects that the majority of resets on existing Helocs will occur between 2015 and 2017.

For example, a homeowner with an outstanding balance of $40,000 on a Heloc and a $210,000 mortgage with an interest rate of 4% will have a monthly payment increase of almost $300 when the equity line of credit converts into a 10-year amortizing loan having a 3% interest rate, according to Moody’s Investors Service.

The increase will be more significant for borrowers with equity lines that require balloon payments after the initial interest-only payment period, as they will owe the entire balance in full. The comptroller’s office is encouraging lenders to assess their Heloc exposures and assist borrowers showing signs of need to minimize future loan delinquencies.

Borrowers are also encouraged to call their lenders to find out how much is owed on their Helocs and ask when and what changes to their payments they can expect.

If unable to meet these terms, a borrower should ask the lender what options are available, including refinancing the Heloc.

Options similar to modifications of a mortgage may be available.

Meanwhile, builders are anticipated to increase new-home production this year. According to David Crowe, the National Association of Home Builders (NAHB) economist, “Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing, and builders see it.”

The challenges builders are facing include the scarcity of land, tight lending practices and the increase in building material costs. Borrowing costs will probably tick up this year as the Fed cuts back on its $85-billion-per-month bond-buying stimulus program.

Freddie Mac’s chief economist, Frank Nothaft, thinks the gradual increase of approximately half a percentage point to 5% this year still represents “cheap” money for builders.

NAHB reports that new-home sales are averaging 8.7% of total home sales across the nation. NAHB’s economist forecasts that total housing starts in 2014 will increase around 25% from last year. Single-family construction is expected to increase 32% in 2014 and then increase an additional 41% in 2015.

Household formations are increasing and averaging 620,000 as compared to 500,000 during the economic downturn.

In Greenwich there are 14 newly constructed homes of all types that are currently on the market. They are priced between $600,000 and $11,995,000. New-home inventory is significantly down from the peak of the market. There is pent-up demand of buyers seeking new homes, especially close to downtown Greenwich.


Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]  

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