Sunday, August 28, 2005

Take the Money and Run, Forest, Run

Another take on home mortgages today by David Streitfeld on the front page of the LA Times. The story is about people who take equity out of their homes to live larger than they might otherwise, and all the consequences that might have. Here's an excerpt:
Homeowners took $59 billion in cash out of their houses in the second quarter, double the amount in the 2004 quarter and 16 times the average rate of the mid-1990s, according to data released this month by mortgage giant Freddie Mac.

People are cashing out so quickly that the term "homeowner" may soon be inaccurate. Fifty years ago, Americans owned, on average, three-quarters of their house and the lender owned the rest. These days, it's approaching an even split.

This spend-now-rather-than-save-for-later phenomenon has produced undeniable benefits. Experts attribute much of the nation's economic growth to cash-out refinancings, home equity loans and other methods of tapping rising home values. And additional real estate investments financed by home equity have contributed to the rising home prices that bring owners such pleasure.
— The Boy in the Big Housing Bubble