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Today, in the Calculated Risk Real Estate Newsletter: Housing: "What Killed the Home ATM in 2006?"
Excerpt:
A reader (ht SV) asked an interesting question: What killed the Home ATM in 2006?
First, the “Home ATM” is a joking reference to mortgage equity withdrawal (MEW), where homeowners extract equity from their homes – like a cash-out refinance or with a Home Equity Line of Credit (HELOC).
In this post, I’ll compare MEW for the current period to both the housing bubble and the 1978 to 1982 period. In Housing: Don’t Compare the Current Housing Boom to the Bubble and Bust, I pointed out that demographics, lending standards, and the Fed fighting inflation are similar to the 1978 to 1982 period, and dissimilar to the housing bubble – and I suggested that we look to the 1980 for parallels to the current boom and coming housing slowdown (not the bubble).
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The following graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.
Note that MEW (as a percent of DPI) was at about the same level in 1980 as today and is well below the peak bubble years.
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So, this is another reason – along with similar demographics, lending standards, and concerns about inflation – to compare the current housing market to the 1978 to 1982 period, and not to the housing bubble. (Of course, there are differences too).
Financial Services
