Don't believe the real estate hype. While the housing market has taken some significant lumps, there are still parts of the country where property values are doing quite well. If you're fortunate enough to live in one of them, you can still tap your home equity for a second mortgage.

It appears that reports of the demise of the housing market may be a bit overblown-at least in certain parts of the country. While there's little doubt that states like California and Florida have suffered from an overheated housing industry, the downturn in home values hasn't been as significant in other sections of the U.S. Tapping home equity is still a potential option, and it can provide a homeowner with a source of cash for home improvements or debt consolidation.

Things aren't as bad as they seem

A survey conducted by the National Association of Realtors in the fourth quarter of 2007 indicated that median prices for single-family homes were actually increasing in nearly half of 150 metropolitan areas. The Midwest region seemed to have shown the smallest overall decrease in home prices.

This is good news in an industry that's been bludgeoned in recent months. Just as the inflated property values of the last few years were bound to fall, declining values can also be expected to eventually bottom out and rebound. The survey may indicate that we're beginning to see the first signs of improving conditions.

Second mortgages for recovery

For homeowners in those recovering regions, the good news is only going to get better. Home mortgage lenders, many of whom had tightened their lending guidelines during the market slump, will likely begin to offer second mortgages to an increasing number of loan applicants.

While no one should expect a return to the lax lending guidelines which helped create the subprime lending crisis, the increase in property values will allow lenders to offer second mortgages to more people. This newfound generosity is not due to a change of heart on the part of lenders. They're always happy to extend credit if they're sure that home values will continue to rise.

Lenders will definitely operate with a higher degree of caution in comparison to the days prior to the subprime crisis. At that time, lenders would have been a little more likely to grant loan approvals if appraisals fell a little bit short of required values. Today, with so many lenders having been burned by subprime defaults, mortgages will only be approved when there's plenty of available equity.

Hopefully, the same domino effect that caused the housing market slump will begin to spread through the country as home prices rise. Many investor reactions are based on fear and anxiety. If people see that areas of the country are already beginning to recover, the overall financial sentiment is likely to change. Lenders will begin to offer more loans, confident borrowers will once again tap their equity, and second mortgages will return on a nationwide basis.

Published on March 10, 2008