After years in the doldrums, Bay Area home equity borrowing jumped last year, reaching its highest level in four years as the housing market rebounded.

The increase is a welcome boost for the region's economy, as new home equity lines of credit -- known as "HELOCs" -- are tapped to pay for remodeling projects and other big ticket items, helping spur job growth.

"This is good news," said Mustafa Akcay, economist with Moody's Analytics. "The housing market has been in recovery now for about a year, and homeowners are accumulating equity on their dwellings, so more and more people are benefiting."

Last year, banks approved 17,844 home equity lines of credit in the counties of Contra Costa, Alameda, San Mateo and Santa Clara, a gain of 20 percent from 2011 when that type of lending appears to have hit bottom, according to DataQuick, a real estate information service.

The trend reflects renewed consumer confidence in the housing market and economy, said Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University. Housing prices in the Bay Area increased at their fastest pace in 25 years in December, according to DataQuick.

"Consumers were hesitant to borrow against their homes" after the housing crash, Baker said. "We're sort of turning the corner on that."


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The center estimates that spending on home improvements increased 9 percent nationally last year. About 20 to 30 percent of home equity borrowing is spent on remodeling, according to the Harvard center.

Elizabeth Angell is tapping an equity line to improve the drainage of her Palo Alto home's backyard, fix a few fences and install a patio.

She said she decided to use the equity line "because interest rates are low, and I recently refinanced my mortgage at a really low rate, which opens up some additional cash to spend. The third thing is now that the election is over, there's more certainty about an economic rebound, so I had more confidence in my earning potential."

Angell is working with Rick Evans, who operates Bauman Builders and Aesthetic Gardens in San Jose. "The process is all very proper now, like the '70s," Evans said. "It's nothing like the days of the late '90s and early 2000s when they were passing out HELOCs like candy canes at Christmas."

Evans said Angell is one of two clients who are using their home equity to pay for remodeling jobs, in contrast to a year ago when his customers were using savings and stock to pay for work on their homes.

While more lines of credit were approved last year, the increase is a mere fraction of the borrowing that occurred during the housing boom, when prices and equity skyrocketed. At the height of the boom in 2005, lenders approved 163,567 home equity loans in the four Bay Area counties, according to DataQuick.

Equity lines of credit can be tapped and repaid like a credit card, but with interest rates that are much lower. Banks are much stricter than they were in the boom, requiring excellent credit scores and solid proof of ability to pay.

About 95 percent of home equity lending is going to homeowners with credit scores above 700 nationally, Moody's Akcay said. "I see some gradual easing, and this 95 percent will decline," he said. "Still, the process will be very slow."

The top five HELOC lenders approved 60 percent of the new equity lines in the Bay Area last year. They include Wells Fargo, up 13 percent from 2011; Bank of America, up 8.5 percent; US Bank, up 5.9 percent and Citibank, up 31 percent. The biggest increase was a 72 percent jump in equity lines approved by JPMorgan Chase.

"The question is whether this is likely the beginning of a meaningful trend," said Andrew LePage of DataQuick. "If so, it becomes a boost -- however modest in the beginning -- to the economy."

Some experts think the answer to LePage's question is yes.

"It's going to continue to rise," said Guy Cecala of Inside Mortgage Finance "It's poised for growth going forward."

Greg McBride of the website bankrate.com is predicting "a good year for home equity borrowers because rates will remain low, and with home prices stabilizing and beginning to rebound, more lenders will be competing for home equity business."

Contact Pete Carey at 408-920-5419. Follow him on Twitter.com/petecarey.

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The top five HELOC lenders approved 60 percent of the new equity lines in the Bay Area last year. They include Wells Fargo, up 13 percent from 2011; Bank of America, up 8.5 percent; US Bank, up 5.9 percent and Citibank, up 31 percent. The biggest increase was a 72 percent jump in equity lines approved by JPMorgan Chase.