Home refinancing traditionally (pre 4th quarter 2000) was accompanied by credit card debt reduction due to debt consolidation, until the 4th quarter, when both grew. For the Q1 2001, home refinancing was accompanied by cash withdraw from home equity, even as credit card debt grew. People are spending their houses now.
It's an economically rational thing to do. Interest rates on home equity loans are substantially lower than those on credit cards. The interest, unlike that charged on credit cards, is tax deductible. The figures to look at, should your thesis be correct, would be those showing foreclosure rates on homes with more than one mortgage. Don't know where to look for those, but have not heard any reports of problems in that area.
With home ownership in America turning over every seven years or so, home equity is simply another asset to be rationally managed like any other. Increased rates of home equity are largely due to a healthy real estate market. If there is a generalized loss of value in family homes, putting consumers in the hole, the kind of problems you see may happen, but it's certainly not happening yet. Given the generalized trend of increased valuations for family homes, it is unlikely to happen.
Hey, I forgot, I'm on the Doom and Gloom board! |
