How Much Does Home Equity Extraction Matter for Spending?

Abstract

In this note, we investigate recent trends in home equity extraction and how these trends may have impacted household spending and residential improvements. Home equity extractions—which rose and fell with house prices in the 1990s and 2000s—have remained sluggish in the recovery despite low interest rates and gains in home equity. Compared to the mid-2000s, equity extractions have fallen especially among younger households and those with lower credit scores and higher leverage, suggesting that mortgage credit supply is likely tighter than before the recession, at least for portions of the population.