Homeowners are tapping their walls for cash again. That quiet uptick in HELOC activity is no accident. People are doing the math. Mortgage balances jumped another one hundred ninety five billion dollars in the first quarter of twenty twenty five. That brings total mortgage debt to twelve point eight trillion. It’s a big number, but it’s the behavior beneath it that’s worth watching.
We’re not in twenty twenty one anymore. Back then, home prices surged and mortgage balances ballooned by over eight percent a year. This time around, growth is slow, barely scraping three percent annually. Buyers have vanished from the existing home market. Builders are holding stronger, but even they are pulling back. Permits for new construction have been on a three month slide. Multifamily permits are getting hit especially hard in the Northeast, dropping forty two percent compared to last year.
What’s creeping back in is the homeowner ATM. Home equity lines of credit rose nearly seven percent year over year. Over three years, they’ve climbed twenty seven percent. These aren’t abstract numbers. That’s real debt, drawn from real homes, to pay for real needs. The thing is, homeowners are cornered. They locked in three percent mortgages when times were good. Now they need cash, but they’re not about to throw away that golden mortgage rate by refinancing into a seven percent loan. So they tack on a HELOC. They borrow against what’s already theirs.
But here’s the hook. HELOCs are personal. They stay with the homeowner. When things go wrong, banks aren’t the first to bleed this time. The borrower is. And in the background, delinquencies are rising. It’s not a full wave yet. It’s not two thousand eight. But the current is shifting.
Meanwhile, sellers are playing a dangerous game. They’ve anchored their hopes to yesterday’s prices. The result? Price cuts everywhere. April saw a record number of listings with reductions. Even Realtor dot com is waving the red flag. Yet eight out of ten sellers still believe they’ll get what they’re asking, or more. Confidence is sky high. Reality is not.
Price drops are spreading. The South and West are taking the brunt of it, but no region is untouched. Builders see it too. Single family permits are down nearly four percent nationwide year over year. Buyers are waiting. Sellers are stuck in the past. And in between, cash gets pulled out of homes one HELOC at a time.
The system isn’t breaking, it’s bending. Quietly, but unmistakably. People are not defaulting at scale. Yet. They’re borrowing more. They’re betting that rates will drop. They’re holding their breath.
Watch this closely. Rising equity taps. Slowing construction. Stubborn pricing. Softening demand. It’s all connected.
Even realtor dot com suggesting homes are overpriced now? pic.twitter.com/SMmOt1vqo8
— Darth Powell (@VladTheInflator) May 15, 2025
Sources:
https://www.realtor.com/news/trends/home-sellers-unrealistic-overpriced-stale/
https://eyeonhousing.org/2025/05/permit-activity-declines-in-march-2025/