The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: MulhollandDrive who wrote (11459)	7/3/2003 2:39:14 AM
From: GraceZ	Read Replies (1) of 306849

I thought you were wondering how to track how much was rolled into mortgages. I was simply suggesting to you what the figure was for 2002 to give you a starting point. You can track just how much was cashout each year going back years and approximate how much consumer debt got rolled in by looking at how far the debt service as a percentage of disposable income has fallen. Also savings accounts and demand deposits are rising steeply from 2001 on, a lot I'm sure because people are reluctant to put their savings into the market. Much of that cashout money is either going in the bank or being used to pay down existing debt. I already showed that debt service in consumer debt as a percentage of disposable income is down so people have a lot more cash from reducing the amount that goes to debt service. A good portion of that was paid off with cash out refinancing, that's the cash out figure I cited for 2002, 2001 was a little bit lower and 2003 is shaping up to be a tad higher. These figures are remarkably consistent as long as rates have been falling AND house prices have risen at least 6%. In 2002 they took out 1.6% to pay off consumer related debt and for new spending. Another 70 billion paid off existing home equity loans but that doesn't get subtracted from home equity because it already was, it just got moved from a secondary to a primary. Debt service as a percentage in both mortgage and consumer debt is remarkably consistent over the years, it rolls up to 14.4 and back down to 11.5, a 3 percentage point spread between low and high. Back in 1993 rates were low and everyone was bitching about their house not appreciating but debt service was low basically because people were forced to stay put for a few years instead of trading up their houses. I imagine we'll roll back to 11.5 again as people get more conservative as they always do after rolling it up. Consumer debt is cyclical.

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