The subtext of this CNBC article seems to be “Why aren’t you taking advantage of this wonderful opportunity to go into debt up to your ears?”
U.S. homeowners today are getting richer by the minute, but they are less likely to cash in on their newfound wealth than during previous housing booms. As home values rise, home equity lines of credit, often used to tap home equity, are flatlining, and the overall amount of money people are taking out of their homes is shrinking.
The collective amount of so-called tappable equity, which is the appraised value of a home minus the 20 percent most lenders require borrowers to keep as a safety net, grew by 7 percent in the first quarter of this year compared with the previous quarter, according to Black Knight, a mortgage software and analytics company. That is the largest single-quarter growth since the company began tracking it in 2005. It is up 16.5 percent compared with a year ago.
Homeowners now have a collective $5.8 trillion in tappable equity, the highest volume ever recorded and 16 percent above the last home price peak in 2006. The average homeowner with a mortgage gained $14,700 in tappable equity over the past year and has $113,900 available to draw. This is the amount over and above 20 percent of the value of the average home.
Yeah? Tap this, pal. The only debt I have is what I still owe on the house, and that amount has begun to visibly decrease. Yeah, I suppose I could get my hands on five figures’ worth of cash if I wanted to go to that much trouble, but why would I want to?
Pater Grant thinks even less of this scheme than I do:
[I]t’s bricks and mortar, frames and siding, foundations and roof. There are only two ways to convert that into cash: sell it (in which case one has to find somewhere else to live, probably at greater expense) or borrow against it. The latter is what the banks and economists would love us to do; borrow against our assets, go ever deeper into debt, to fund greater expenditure and grow the economy some more. The fact that the USA is already neck-deep in debt, collectively and individually, is ignored. That’s merely an inconvenience. The important thing, as far as they’re concerned, is to goose us into greater debt to fund greater spending — so that they can make more money out of us.
Emphasis in the original. The current operation of the economy — A buys something from B, but C skims off any profits to be had — is not something I’m willing to borrow money to support.