Many people are using their homes as credit
cards.
Steadily rising home values in Valley neighborhoods and record low mortgage
rates have allowed people to delve into their equity to pay off other bills
or make big purchases such as cars.
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Tapping equity can benefit the economy, said
Elliott Pollack, a Valley economist and real estate investor, who writes for
the Arizona Blue Chip Economic Forecast.
"If consumers are paying down more expensive credit, it will lower the
consumer debt burden," he said. "The downside is that they could be
financing their running shoes over 30 years."
U.S. consumer debt is at its highest in history.
And almost one in 10 of all American homeowners say they have gotten a home
equity loan in the past year.
About 3 percent say that they have taken out a second mortgage, according to
Fannie Mae.
Others pull money out by refinancing. Since 2000, as many as 40 percent of
all home mortgages have been refinanced, according to Economy.com. Last
year, consumers borrowed $269 billion through refinancings and home equity
loans.
"The disturbing part of the housing boom is the incredible number of people
refinancing and using their home equity to buy other consumer goods," said
John Foltz, president of Realty Executives.
"The economy will feel this down the road."
The Arizona Republic
Mar. 2, 2003