April 1, 2008
...A pullback in the use of home equity lines of credit has had a dramatic effect on consumer spending, according to a recent study by economists Stuart Gabriel, Raphael Bostic and Gary Painter. In a rising housing market, homeowners can refinance their homes and cash in on the market-driven increases in home values. Economists call the phenomenon "housing-based wealth." In recessionary times, however, the sudden shrinkage of housing-based wealth can make the overall economy much worse because consumers suddenly have a lot less money to spend...