Americans Still Hitting the Housing ATM Machine

by: Tony Sagami

Tony Sagami (Harvest Advisors) submits: According to Freddie Mac, American homeowners are yanking money out of their home equity in record amounts. Freddie Mac estimates that the dollar amount of home equity being pulled out of homes will increase from $142 billion in 2004 to more than $204 billion this year. In just the last quarter, 72% of refinances resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage.

At the same time, the cost of borrowing all that money is growing up. Freddie Mac reported that the median ratio of old-to-new interest rate was 1.09, which means that all refinances resulted in a new interest rate that was 9% higher than the old mortgage.

After 12 interest rate hikes and promises of more to come, the cost of all this borrowing is going to rise even more. At what point do debt-strapped Americans cry “uncle?