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Housing: "What Killed the Home ATM in 2006?"

by Calculated Risk on 5/01/2022 02:21:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Housing: “What Killed the Home ATM in 2006?”


A reader (ht SV) asked an interesting question: What killed the Home ATM in 2006?

First, the “Home ATM” is a joking reference to mortgage equity withdrawal (MEW), where homeowners extract equity from their homes – like a cash-out refinance or with a Home Equity Line of Credit (HELOC).

In this post, I’ll compare MEW for the current period to both the housing bubble and the 1978 to 1982 period. In Housing: Don’t Compare the Current Housing Boom to the Bubble and Bust, I pointed out that demographics, lending standards, and the Fed fighting inflation are similar to the 1978 to 1982 period, and dissimilar to the housing bubble – and I suggested that we look to the 1980 for parallels to the current boom and coming housing slowdown (not the bubble).

The following graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

Note that MEW (as a percent of DPI) was at about the same level in 1980 as today and is well below the peak bubble years.

So, this is another reason – along with similar demographics, lending standards, and concerns about inflation – to compare the current housing market to the 1978 to 1982 period, and not to the housing bubble. (Of course, there are differences too).

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