WASHINGTON — If you’re a homeowner, rising home prices are a blessing and a curse. It’s nice to get more for the home you sell, but it may be moot if you can’t afford the newer, nicer, larger home you desire.
And, if you go home shopping today, you’ll be paying a much higher interest rate than that nice low number you scored when you refinanced a year or so ago. So what’s the alternative?
“They’re renovating,” said CNBC Real Estate reporter Diana Olick. “They don’t want to move, so they put on another bathroom.”
Olick said homeowners are paying for it with the rising value of that current home.
“You’re seeing people get more equity than they ever thought,” she said.
And the vehicle to make it happen is a home equity line of credit.
“You keep your first mortgage, and you take out that line of credit so you can pull cash out of the house,” said Olick.
As little as a year ago, many homeowners were refinancing and taking cash out of their homes. But now, with higher interest rates, that’s not so practical.
“You don’t want to do a re-fi and lose that low rate. Now, they have equity in the house to pull it out and add value to the home,” said Olick. “So it’s not just improving their lifestyle, but adding value to that property. They’re not taking the money out to buy cars and boats and go on vacations.”
What kind of renovations are people doing?
“Kitchen and bath are the sellers. That’s what people see,” Olick said.
