2016 Outlook: Home Equity Driving P/S Sales

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Columnists like to paint a rosy picture on January 1, full of hope and optimism for the coming year, because it's easy to be cheery and that sort of blue sky and sunshine goes down pretty well with the readers. But not me — I tell it like it is. By coincidence, however, I am full of hope and optimism for 2016 pool and spa sales.

Why? The gradual rise in home equity. Like one of those giant overhead buckets at a waterpark, it's been filling up slowly for about five years, and it's about to reach that point where it tips over and dumps out all the banknotes our customers need to build a little backyard escape.

Home equity is where the middle class gets its financial confidence and actual funds for pools and spas, and home equity is just about to double to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve.

This key gauge of pool and spa buying capability — homeowners' equity as a share of real-estate values — is nearing the point seen in 2005. You remember 2005. That was a good year for pools and spas.

Now, obviously we aren't yet seeing the buying levels we saw then. Home-equity loans, lines of credit and cash-out refinances are on the rise, but they are still depressed by normal standards.

We haven't seen those 6 trillion new-home-equity-dollars-generated-since-2011 released into the economy in the torrents we might have because of several impediments.

First of all, the buildup has been gradual. It just takes a few years to fully realize those 3, 5 and 7 percent bumps in your assessment have resulted in a 30 percent increase in your home value, and you could use that 30 percent to make your backyard into a sweet haven. Tomorrow.

And banks aren't as obliging with loans as they used to be, which remains a tough but tractable problem, but the big thing we're fighting, even more than a lack of funds, is a lack of confidence.

In the '90s, people were ok with some personal financial risk. You didn't want to make a mistake, but if you did, well, so what? Ever since the recession, though, many people emotionally equate risk with possible ruin. And it has taken a while for them to unclench. But with every month, the memory of those dark days fades a little further, and they feel a little more financially secure.

This year a lot of people are going to have an epiphany that goes like this: "Hon, I'm looking at our mortgage statement. Do you realize we have enough equity to get that patio setup you've wanted for about 10 years?"

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