"MUCH of the growth of the United States in recent years has been financed by homeowners’ rising wealth."
Signs of Lean Times for Home Equity, the American Piggy Bank – New York Times
MUCH of the growth of the United States in recent years has been financed by homeowners’ rising wealth. But now the growth in that wealth has almost vanished.
The government reported this month that it estimated the equity of Americans in their homes — what the homes are worth less the money owed on mortgages — rose a scant 0.1 percent in the third quarter. At an annual rate, that was just 0.5 percent, the smallest gain in more than a decade.
From late 2003 through the first quarter of this year, the gain in home equity was running at more than 10 percent a year, more than enough to keep Americans feeling richer and to provide cash — through refinancings or home equity loans — for other uses.
Some of that borrowing came from home buyers who needed to borrow to pay the high prices, and some from homeowners refinancing their homes. But a lot also came from an increased willingness of Americans to use home equity lines of credit — and from the expansion of the asset-backed securities market that funds many such loans. The amount outstanding under them rose at a compounded annual rate of 22.9 percent over that period.
In my opinion this is a good thing – the best way to earn money is always to borrow it. And if you need more money, get a second job by returning things that you buy. You can’t lose!