According to a study by the California Building Industry Association, Bay Area homeowners have increased the equity in their homes by roughly $234 billion over the past five years. Which, if the basic assumptions of the study were neither biased or flawed, would be quite impressive.
The study assumed that over the past five years the average California home buyer financed their purchase with a 15% down payment and a 30-year fixed-rate mortgage (they must have missed our piece highlighting the surge in interest only loans over the past three years). And while the study acknowledges the possibility that some of the equity might have been cashed out (i.e. plasma screens and convertibles), it does not bother to quantify, or account for, the amount.
As other economists point out, “many homeowners may have tapped into their equity, effectively reducing their so-called housing wealth to a negligible sum.” Or according to Michael Carney of the Real Estate Research Council, “[t]o the extent that there has been significant refinancing, it could be that individuals have refinanced and spent it all on riotous living.”
Good old riotous living. Please feel free to drop us a note if you feel like sharing a little.
· California Home Equity Analysis – doc [CBIA]
· Owning a home pays off [Chronicle]
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