| Cashouts Added Nearly $100 Billion to Economy Last Year
Recent report on state of housing industry confirms what brokers already know; residential financing is hot June 24, 2003 By ANNE LINEBERRY |
| The 2002 housing market outperformed all previous years by almost every measure, according to Harvard University’s Joint Center for Housing Studies.
The report, The State of the Nation’s Housing, concluded that the housing market helped the limping economy along last year. As for records, the study said that residential investment, home sales, home ownership rates, aggregate home equity and total mortgage debt all hit record highs in 2002. Also, according to the study, new single-family residential construction hit its highest level since 1978. The segment that didn’t fare as well as its counterparts? Manufactured housing, which according to the survey experienced decreased production during 2002. Mortgage lending for new homes, existing homes and remodeling hit record highs in 2002, the study said. Consumer borrowing activity was rampant during 2002. More than $134.5 billion went to pay off second mortgages while rolling straight into new first mortgages, according to the study. Higher-interest mortgages were paid off to the tune of $69.5 billion during the year. The study estimated that $96.5 billion in home equity was taken out and pumped into the faltering economy, and still, home equity hit a record $7.6 trillion. According to the study, the Federal Reserve Board estimated the average home equity loan cash out at $26,700 during the first half of 2002 and all of 2001. Household equity rose by $405 billion in 2001, while stockholder portfolios declined by $1.4 trillion, the study said. Home ownership became the primary asset for a growing number of people last year. In 2002, 66 percent of homeowners with stock portfolios had more equity in their house, up from 60.5 percent in 2001. The study noted a few concerns about the housing sector. One is the possibility of a “burst” in the “housing bubble,” resulting in declining house values. The study concluded that such a “burst” is unlikely because of many factors, including: house prices rising the fastest relative to income are doing so in areas with a scarcity of developable land and regulations, not because of value depreciation; housing depreciation usually occurs as a result of “concentrated job losses,” a factor not seen so far this business cycle; and that for houses to become a real drain on a homeowner’s net worth, their value has to start underpacing inflation, which at this point seems unlikely. Another concern which may impact the future of housing sector, the report said, is the number of homeowners that pay a large share of their income on housing expenses. The study said that 14.3 million Americans pay at least half their income on housing expenses and that an additional 17.3 million pay 30-50 percent of their income on housing. The long-term outlook for the industry includes growth. The study predicted that during this decade, the United States will add 11 million new homeowners, with a net gain of 6 million. The housing industry should continue to garner one-fifth of the nation’s economy, the study concluded. |
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Anne Lineberry is MortgageDaily.com‘s editor. She previously worked as an online editor/producer for DallasNews.com and on the Metropolitan desk for the print edition of The Dallas Morning News. Email Anne at AnneLineberry@MortgageDaily.com |
