Raphael Stevens

Rising home prices mean today’s mortgage holders also have record levels of equity.
With interest rates poised to rise, many homeowners may want to tap those funds.
But just because you can, that does not mean you should, experts say.

New homes under construction by CastleRock Communities in Kyle, Texas, in November 2021.
Matthew Busch | Bloomberg | Getty Images

Record increases in home prices are also pushing up the amount of equity people have in their abodes.
For many Americans, that means they can borrow more against what is often their biggest asset.

However, financial experts caution you should think carefully before making such a move.
The average mortgage holder currently has about $185,000 in home equity to tap, which is the amount they can access while still retaining a 20% stake, according to mortgage research from Black Knight.
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Homeowner equity is now an aggregate $9.9 trillion, according to Black Knight. That comes after a 35% gain in 2021 worth $2.6 trillion, the largest annual increase on record, beating a $1.1 trillion bump in 2020.
For some homeowners, the hot market has made it an attractive time to sell. Of course, those same rising prices, as well as high rents, can make it difficult for people to relocate.

Many homeowners have instead chosen to draw money from their homes, which they can traditionally do in three ways. That includes so-called cash out refinancing; home equity lines of credit, or HELOCs; and reverse mortgages, often offered through what is called home equity conversion mortgages, or HECMs.
More homeowners, particularly those age 62 and over, have been eager to extract equity from their homes amid current market conditions, research from the Urban Institute found. The combined number of those loans to seniors increased to 759,000 in 2020, from 647,000 in 2018.

That increase was driven mostly by cash out refinances, whereby a new, larger mortgage replaces the previous one. The median loan for those transactions rose to $205,000 in 2020, from $180,000 in 2018, according to the Urban Institute.
With borrowing costs expected to rise as the Federal Reserve raises interest rates, that may increase the incentive for homeowners to make these transactions now.
“As interest rates rise in the coming year, you could see folks using more second lien products … to tap some of that equity when they need it,” said Karan Kaul, principal research associate at the Housing Finance Policy Center at the Urban Institute.
“Folks already have a very low rate, and as rates rise it’s not going to be economical for most of them to refinance,” Kaul said.

Just because you have home equity doesn’t mean you can borrow from it.

Greg McBride
chief financial analyst at Bankrate.com

As rates kick up, the market may shift from being predominantly cash out refinance transactions to more HELOCs and home equity loans in the coming years, he said.
Cash out refinances require you to refinance your entire mortgage, which may not be economical for many consumers, as their payments would likely go up. A HELOC may be a better option for someone who is remodeling their bathroom, for example, and needs to borrow only $25,000. While that may have a higher interest rate, the underlying principal on that loan is much lower, Kaul said.
“It’s an individualized, personalized calculation that has to happen at the household level,” Kaul said.

Maintain 20% equity

When deciding whether to borrow from your home, it’s important to remember that lenders typically will want you to maintain a 20% equity stake, said Greg McBride, chief financial analyst at Bankrate.com.
“By and large, this is not 2005, when you can pull out every last nickel of equity that you have,” McBride said.

“Just because you have home equity doesn’t mean you can borrow from it,” he said.
For people who want to draw money to pay down credit cards or fund home improvement projects, the temptation can still be great.

Exercise caution consolidating debts

Current credit card rates are hovering at around 16%, according to Bankrate, while mortgage rates are around 4%.
McBride cautions against consolidating your credit card debts with a home equity loan as a permanent solution. If the debt was the result of a one-time event, like a medical bill or period of unemployment, it can be helpful. But if it’s indicative of your lifestyle, chances are you will still run up a balance under a home equity loan.
“If you haven’t solved the problem that produced the credit card debt in the first place, you’re just moving around deck chairs on the Titanic,” McBride said.

Consider improving your home

Aleksandarnakic | E+ | Getty Images

Home improvement projects may also be a reason to tap your home equity.
“If I add another bedroom and a bathroom and a pool, the value of that is instantly higher than what you can buy for, not to mention the enjoyment that you’ll get along the way,” said Charles Sachs, a certified financial planner and chief investment officer at Kaufman Rossin Wealth in Miami.
While some of Sachs’ high-net-worth clients have pursued these transactions for home improvements or even invest in higher yielding investments, these strategies are not for everyone, he warns.
You should be financially savvy and have the ability to take on risk, he said.
Moreover, it is impossible to know when the absolute bottom to borrow will be. Still, we may look back in five years and be envious of current interest rates, he said.

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Lordstown Motors expects to produce and sell up to only 3,000 vehicles through next year, the company announced Monday.
The plans include 500 vehicles this year, with retail production slated to begin in the third quarter.
Those numbers are far below the amount former management sold investors on when the company went public in 2020.

Lordstown Motors gave rides in prototypes of its upcoming electric Endurance pickup truck on June 21, 2021 as part of its “Lordstown Week” event.
Michael Wayland / CNBC

Embattled electric vehicle start-up Lordstown Motors expects to produce and sell up to only 3,000 vehicles through next year, the company announced Monday.
The plans include 500 vehicles this year, with production slated to begin in the third quarter — a year later than expectations cited by Lordstown when it went public through a special purpose acquisition company in October 2020.

The total sales and production figures also are far below the amount former management sold investors on in the runup to the public listing. Lordstown initially expected to build 2,000 Endurance pickups in its first year, followed by 32,000 units during the first full year of production.
Shares of the pre-revenue company plunged as much as 28% during Monday afternoon trading. The stock closed Monday at $2.57 a share, down by 20%.

Lordstown Motors announced the production forecast as part of reporting its fourth-quarter results. Net loss widened to $81.2 million, and the automaker incurred a total of $115 million in expenses.
Company executives said they need to raise about $250 million this year for its business operations, including tooling to produce the vehicle.
Lordstown CEO Dan Ninivaggi said the company will initially only sell vehicles to a modest number of pre-selected businesses. It said it still needs some regulatory certifications before it can put vehicles on sale.

The aspiring automaker initially planned to produce the Endurance pickup internally at an Ohio plant it purchased from General Motors.
But following an executive shake-up and amid ongoing concerns that the company could run out of cash, Lordstown announced a deal to sell the plant to iPhone maker Foxconn for $230 million in November. That deal, which includes Foxconn producing the Endurance pickup, has not been finalized.
Lordstown and Foxconn also are in negotiations about a potential joint development of future vehicles. The company characterized those talks Monday as “an important component” for Lordstowns’ future success.
“We need to bring that to a conclusion, and I’m hopeful we’ll get there,” Ninivaggi said Monday.

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Kyle Vogt, who co-founded Cruise and ran the start-up for years following GM’s acquisition in 2016, has once again been named CEO of the company.
Vogt replaces Dan Ammann, a former president of GM, who was unexpectedly ousted from Cruise in December.
Cruise is in the midst of securing final approval to commercialize a ride-hailing fleet of autonomous vehicles following years of testing in San Francisco.

Cruise Automation COO Dan Kan (l to r), Cruise Automation CEO Kyle Vogt and General Motors President Dan Ammann Tuesday, November, 20, 2018 at Cruise Automation offices in San Francisco, California. 
Source: Noah Berger | General Motors

In naming a new CEO of self-driving company Cruise Monday, majority-owner General Motors is handing the firm back to one of its original founders.
Kyle Vogt, who co-founded Cruise and ran the start-up for years following GM’s acquisition in 2016, has once again been named CEO of the company. He announced the appointment Monday via social media, and it was later confirmed by a Cruise spokesman.

Vogt replaces Dan Ammann, a former president of GM, who was unexpectedly ousted from Cruise in December. Ammann was reportedly let go from Cruise by GM CEO and Chair Mary Barra, who also chairs Cruise’s board, over disagreements in strategy, including when to take the company public.
“Cruise and GM, we’re really totally aligned now on accelerating the joint autonomous vehicle strategy that we outlined at our recent investor day,” GM President Mark Reuss told CNBC a day after Ammann left the company.
Returning the company to Vogt, who had already been serving as interim CEO, comes at a pivotal time for the company.
Cruise is in the midst of securing final approval to commercialize a ride-hailing fleet of autonomous vehicles following years of testing in San Francisco. It’s also growing the operation, with plans for the company to generate billions in revenue this decade.

“Kyle certainly knows the company … Hopefully during Ammann’s tenure he had a chance to work closely with him and learn more about operating a company this size,” said Guidehouse Insights principal analyst Sam Abuelsamid. “If GM was willing to give him back the CEO position on a permanent basis, they presumably felt that he had learned enough in the last several years that he could handle the job now.”

Since acquiring Cruise, GM has invested billions in its operations and brought on investors including Honda Motor, Softbank Vision Fund and, more recently, Walmart and Microsoft.
Vogt will retain his prior positions of chief technology officer and president of the company.

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Cosmetics company Estee Lauder said Monday it had forced out executive John Demsey, days after he acknowledged he posted a racist meme on a personal social media account.
Demsey, 65, faced backlash for an Instagram post containing the N-word and a joke about Covid-19, which is no longer on his feed. He was initially suspended without pay.
Demsey, who oversaw cosmetic brands such as Clinique, later apologized in another post.

John Demsey, president of Estee Lauder Cos., speaks at the World Retail Congress in Barcelona, Spain, on Friday, May 8, 2009.
Mike Laburu | Bloomberg | Getty Images

Cosmetics company Estee Lauder said Monday it had forced out executive John Demsey, days after he acknowledged he posted a racist meme on a personal social media account.
The announcement came in a letter that was shared with its employees worldwide.

Demsey, 65, faced backlash for an Instagram post containing the N-word and a joke about Covid-19, which is no longer on his feed. He was initially suspended without pay. Demsey, who oversaw cosmetic brands such as Clinique, later apologized in another post.
“I am so terribly sorry and deeply ashamed that I hurt so many people when I made the horrible mistake of carelessly reporting a racist meme without reading it beforehand,” said Demsey.
A company representative said that he was told to leave the company and that he agreed to retire.
Estee Lauder’s decision comes as part of an initiative over the past two years to become more inclusive and equitable, according to the letter. “Together we are making progress against our commitments to our employees, our partners, and consumers.”
Shares of the company were down nearly 2% to $294.45 midday Monday amid a broader market sell-off.

The Wall Street Journal first reported Demsey’s exit.
Clarification: This story was updated to clarify that Demsey agreed to retire.

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Russia’s national and club soccer teams were suspended indefinitely from international play by the sport’s governing bodies because of the country’s invasion of Ukraine.
The ban means that Russia’s national team will be blocked from playing in the 2022 World Cup.
Russia had been set to compete soon for one of the slots allocated to European nations in that quadrennial competition, which will be held in Qatar.

Russia’s Aleksandr Erokhin in action with Cyprus’ Grigoris Kastanos, Gazprom Arena, Saint Petersburg, Russia, November 11, 2021.
Anton Vaganov | Reuters

Russia’s soccer teams were suspended indefinitely from international competition by major governing bodies Monday because of the country’s invasion of Ukraine.
The ban means that Russia’s national team will be blocked from playing in the 2022 World Cup.

Russia had been set to compete soon for one of the slots allocated to European nations in that quadrennial competition, which will be held in Qatar.
The suspension from international play was imposed jointly on Russia’s national squad and on club teams by FIFA, the world-wide governing body for soccer, and UEFA, which oversees European soccer.
Before Monday’s announcement, FIFA had faced criticism on Sunday for a decision to allow Russia to continue competing for a World Cup slot. Russia had been set to play Poland next month in a play-off.

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In a joint statement Monday, the groups said, “Following the initial decisions adopted by the FIFA Council and the UEFA Executive Committee, which decisions envisaged the adoption of additional measures, FIFA and UEFA have today decided together that all Russian teams, whether national representative teams or club teams, shall be suspended from participation in both FIFA and UEFA competitions until further notice.”
“Football is fully united here and in full solidarity with all the people affected in Ukraine,” the groups said. “Both Presidents hope that the situation in Ukraine will improve significantly and rapidly so that football can again be a vector for unity and peace amongst people.”

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Shoppers may be hard pressed to believe that Victoria’s Secret’s new lingerie lineup is actually from Victoria’s Secret.
In mid-February, the retailer unveiled its latest collection of bras and panties, known as Love Cloud. The line is focused on all-day comfort, with minimal frills, the company said.
Victoria’s Secret is set to report its fiscal fourth-quarter results after the market closes on Wednesday.

Source: Victoria’s Secret

At first glance, shoppers may be hard pressed to believe that Victoria’s Secret’s new lingerie lineup is actually from Victoria’s Secret.
In mid-February, the retailer unveiled its latest collection of bras and panties, known as Love Cloud. The line is focused on all-day comfort, with minimal frills, Victoria’s Secret said. The company also selected women of diverse backgrounds and body types — including its first-ever model with Down syndrome, Sofia Jirau — to star in the collection’s marketing campaign.

The launch of Love Cloud is yet another sign Victoria’s Secret’s is serious about working to overhaul its image — from racy and exclusive to tasteful and inclusive. And, importantly for skeptical investors, it could help to propel sales in the coming quarters. Victoria’s Secret shares are down more than 4% year to date. The stock has fallen more than 20% over the past six months, bringing the retailer’s market capitalization to $4.8 billion.
Revenue at Victoria’s Secret in 2020 tumbled 28% to $5.4 billion from $7.5 billion a year earlier, due in part to Covid-related store closures and hampered consumer demand. The company could provide more details when it reports its fiscal fourth-quarter and full-year results after the market closes Wednesday.
The shift by Victoria’s Secret also comes as women seek to incorporate more comfortable items into their wardrobes, even as they return to social settings, including going to the office. Analysts appear to be in favor of Victoria’s Secret’s push to get the basics right.
That means the company is going back to the drawing table for new merchandise, according to Victoria’s Secret’s design chief.
“We see innovation back in our business,” Chief Design Officer Janie Schaffer said in an interview.

A company veteran, Schaffer rejoined Victoria’s Secret in 2020 following a stint at British department store chain Marks & Spencer. Schaffer brought in a new team to bring a fresh perspective on the business. It appears to be a successful move in the early going.
Schaffer’s appointment also notably came during a broader shake-up at Victoria’s Secret. Martin Waters, former head of L Brands’ international division, was tapped in late 2020 to be chief executive of Victoria’s Secret. At the time, the company also announced a new chief human resources officer and executive vice president of North America store sales, who were tasked with improving employee morale and winning customers back.
This was all shortly before Victoria’s Secret split from Bath & Body Works to become a separate publicly traded entity, in August.
Since then, Schaffer has played a key role in creating Love Cloud, which she described as “the most comfortable bra in the world.” It’s a stark divergence from the wire-filled and padding-packed bras that Victoria’s Secret has debuted in the past.
“In the short time that I’ve been back in the business, we have brought out a maternity nursing bra … we have brought out a mastectomy bra,” she said. “Really acknowledging women in every in every stage of their life. That’s what’s driving all of us.”
The company has, meantime, been in the process of remodeling its retail stores around the United States to bring in fresher fixtures, lighter paint on the walls and mannequins of all shapes and sizes to welcome customers inside. Victoria’s Secret has said it plans to touch up all of its roughly 1,400 locations globally, in the coming years. It’s also testing a smaller, off-mall format.

Signs of an improving image

One recent survey found that women are increasingly paying attention to Victoria’s Secret’s turnaround.
Bank of America polled 1,000 women between the ages of 18 and 65 in January and found the respondents had fewer complaints about Victoria’s Secret compared with pre-pandemic.
Thirteen percent of women said they liked Victoria’s Secret better than they did pre-Covid, while 23% liked it less, and 64% had no change in opinion, BofA found. The firm noted that this is improved from 2019 levels, when 33% of respondents in a similar survey said they liked Victoria’s Secret less over the past 12 months, with many women citing poor brand image.
BofA also found that the PINK brand, a division within Victoria’s Secret that caters to younger females, has maintained its brand image more steadily in recent years. The biggest complaint among consumers for PINK, the firm found in the same survey, is higher prices.
“Victoria’s Secret’s brand overhaul appears to be working,” BofA analyst Lorraine Hutchinson said in a note to clients. “Victoria’s Secret’s resumption of bra launches is a key strategic change and is crucial to building share.”

Choosing comfort

By launching Love Cloud, which includes bras in six different silhouettes, Victoria’s Secret hopes to appeal to women of all ages who are looking for reasonably priced, everyday lingerie.
Kristen Classi-Zummo, a fashion apparel industry analyst for NPD Group, said women are increasingly seeking out comfort-fitting bras, including sports bras, for day-to-day wear. Total bra sales in the U.S. grew 6% in 2021 compared with 2019 levels, according to NPD. Within that figure, sports bra sales surged 43%, and nonsports bras were up 7% on a two-year basis. The latter category includes wire-free bras, such as the ones Victoria’s Secret launched as part of Love Cloud.
“There’s been this fundamental shift in the types of bras women are looking for,” she said. “We’ve all shifted to a more comfortable and more casual wardrobe … and that’s ultimately affecting what we wear underneath those clothes.”
To be sure, Victoria’s Secret also competes with a number of up-start brands such as ThirdLove and Lively, as well as American Eagle’s Aerie division, which sell a large selection of comfort-focused bras including sports bras and bralettes. And from the start, these retailers have been more inclusive in their marketing to consumers.
Jane Hali & Associates retail analyst Jessica Ramirez said she’s noticed Victoria’s Secret has become more inclusive, with its selection of merchandise in stores and online spanning more sizes and with the retailer’s models appearing to be less retouched in images.

Earnings snapshot

In the near term, however, ongoing supply chain constraints may overshadow the progress the company has been making, Ramirez said.
Victoria’s Secret is set to report its fiscal fourth-quarter results after the market closes on Wednesday, where it should shed light on the supply chain topic and discuss any financial implications of the recent Love Cloud launch.
The company in late December reaffirmed its previous guidance that called for sales to be flat to up 3% compared with the prior year’s $2.1 billion. It sees diluted earnings per share in a range of $2.35 to $2.65.
Analysts are expecting earnings to be on the high end of that range, at $2.64 a share, and for sales to amount to $2.14 billion, according to a Refinitiv survey.

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