I honestly believe that homeowners refinancing for living expenses is much lower then people think..It happened,no question, but not enough to slow the economy..

It's definitely a topic that's being hotly debated among economists as the housing recession deepens. The amount of home equity withdrawn in the last five years is huge but there's a great deal of debate as to how/where it was spent. Alan Greenspan has a very long paper out on the subject...which you can google should you have the stamina to wade through it. Here's a link to a much briefer view of MEW.

Here is a link that might be useful: Is Home Slump a Speed Bump for Spenders?

I don't know how much I'd trust those stats. Every time I re-fi'd for a lower rate, it was listed as a "Cash out Re-Fi" even though I never took a dollar out. (And no, no fees got rolled in.)

I hear ya, bentruler. I think Big Al's data sources are a bit thin. Judging by my very unscientific Lexus Test, I'd say most of my neighbors extracted money and pumped it right into consumer purchases or used it to pay off prior consumer purchases carried on credit cards.

Come to think of it I rarely see those commercials encouraging people to pay off their credit cards with a home equity loan anymore. What a terrible idea.

There were some pie-in-the-sky TV commercials touting taking equity. I remember one where a couple "dedicated" equity in their second bathroom to paying Junior's first year in college. (That wasn't as bad as their plan to convert the equity in their family room addition to a Caribbean cruise.)

"Leverage to the max" has been the rule. Now that "max" that was set in 2005 or 2006 may turn out to be too far over the edge.

Guess we will only know if/when the consumer economy stalls. So far the posts on this forum do not reflect people hunkering down; they're still looking for bigger and better houses even when they can't sell the house they own.

Come to think of it I rarely see those commercials encouraging people to pay off their credit cards with a home equity loan anymore.

Aren't mortgage rates going up right now? I can't imagine people refinancing to a HIGHER rate. So these commercials probably don't make market sense anymore.

FWIW, the only time we refinanced was to take advantage of lower interest rates and like Bentruler, we didn't take out any cash although it allowed (and expected).

FWIW, the only time we refinanced was to take advantage of lower interest rates and like Bentruler, we didn't take out any cash although it allowed (and expected).

Same with DH and me. We didn't even think about taking out any extra cash. Could be because we don't have tons of debt - we pay our credit cards in full each month and only finance one car at a time.

If middle class incomes are stagnant or have actually decreased (in real dollars), yet the consumer economy continued strong, where did the money come from? People work more jobs/hours? People take on more debt? (More people get into selling drugs? Well, *something* is funding consumers!)

as others have noted, they refi'd their existing mortgages to lower rates WITHOUT taking additional cash out,thus lowering their carrying costs, and freeing up $$$ to spend as they choose..I can personally say that i did exactly this several times since 2000, all the while not taking any additional $$$ and refi'ing at no cost

I'm not sure qdognj...

We took a purchase money mortgage summer of '03 at 4.78% with a 15 year amortization. It's not been lower since except for a two-day period a few days after we locked in the above rate. The peak of the re-fi was at least a year ago. Also, somewhere within the past year...didn't the US savings rate reach effectively zero? I know the reported savings rate does not include 401(k)s; but still even refi'ing at 3% below your existing loan you'd have to save awhile to purchase the new 60" TV.

Personally, I think some of it did go into consumer spending & I hope none of it went towards the grocery tab. What I don't know...how many took equity & purchased cars, vacations, jewelry (Tiffany's has done well the past few Holiday seasons), electronic toys, etc. We may never know the answer. I think most cash-out re-fi dollars went towards remodels. The problem is further complicated for today's sellers because even a full kitchen re-do doesn't comp out dollar for dollar when it's time to sell, in a normal market.

I believe the most common estimate for the return on a kitchen remodel is at around 85%. So, the other 15% represents evaporated hard dollars. The new bathroom doesn't recoup even 85%. If you remodeled & quickly sold during the boom...then those people probably did recoup their 'investment'. But, those who remodeled between 2003-2006 & are now trying to sell will not recover all of their expenditures. Remodeling has, historically, been done to increase enjoyment and/or liveability of a home for the owners...not the craziness we've seen the past five years, or so.

/T

Here's a Washington Post article on refinancing. It sounds like both Tricia AND Chisue are right. People are using their house as an ATM but much of the money goes towards housing expenses (e.g., remodeling or purchase of second home). There is a line in there about the main driver of increased spending being higher income rather than refi cash outs.

Here is a link that might be useful: An ATM That's Out of Money

Just saw a survey on CNBC...said 48% of Americans are NOT taking a vacation this year.

I'm glad we are in the other 52%!

/T

Wonder if this could be some consumer slow-down happening? Fewer vacationers will impact my village.

48% of what sample size? I find it highly unlikley that % is accurate..I don't know anyone not taking a vacation, not 1...Heck, most have a vacation home...

Nearly half of all Americans don't plan to take a vacation this summer, and more than half say they're driving less often in the face of high gasoline prices, according to CNBC's latest Wealth in America survey.

A total of 48% of Americans won't go on vacation, including 65% of those who earned $30,000 or less. On the other end of the income scale, 25% of those who earned more than $100,000 a year have opted to stay home.

The survey said 15% of Americans didn't use all their vacation time last year, including one in ten who failed to take as many as four or more of their allotted vacation days.

Of those who take time off, 46% said they stay in touch with the office via cell phone, e-mail or Blackberry.

Among those who plan to take a break, the study found that they expected to cut vacation spending this year. The survey report said vacationers were willing to fork out $1,117 -- a slight decline from last year's spending of $1,165.

Economy Not Big Factor

However, economic factors did not play a major part in this trend.

The dollar's recent weakness had no effect on the decision to travel to Europe, but only 21% of Americans made plans to spend summer abroad.

For those planning to take time off, cost of the trip is secondary to the weather at the vacation destination. Historic and cultural interests trail the cost of lodging when planning a trip, the survey found.

Nevertheless, high gasoline prices are beginning to take a bite out of some plans, with 55% saying they're driving less. But only 25% say they'll start conserving if the price of a gallon of gas hits $4 or more.

Here's a choice many Americans face: Your boss likes your work and offers you an extra week's pay or an extra week off.

Split on Answer

Forty-five percent would take the time off while 47% would grab the money and 7% weren't sure.

Taking the additional time off were lower-middle class workers, suburbanites, the wealthy, and professional women, the survey found.

Opting for extra money were professional men, those earning less than $30,000 a year, those holding postgraduate degrees and seniors.

Most Americans feel comfortable enough at work that they believe taking all their vacation days wouldn't harm their ability to secure raises or promotions. Only 7% said taking a vacation would damage future success at the office.

As you fret about this year's plans, remember that 10% of Americans don't get any paid vacation.

Regarding vacations, I have noticed a drop-off in responses to the ad for our Maui condo. At the same time, there's been an increase in responses from Canadians (cheap US$?). The TripAdvisor Hawaii forum has lots of Brits posting, too.

Fuel prices are reflected in increased air fares to the islands. Our fare for February is up $200 per ticket.

At least we have the weather determinator on our side!

"I don't know anyone not taking a vacation, not 1"

I don't know anyone who IS taking a vacation! DH is the ONLY person I know who gets "vacation days" (which we save for using a half-day at a time for my medical procedures or for business that can't be taken care of after hours or on weekends) at work, none of our friends or family can afford to just not work for a week or two so they can go goof off. No workee, no money, and no money, no roof overhead or gas in tank. Not to mention the actual cost of the vacation itself - transportation, lodging, food, etc. all do cost money. I don't know anyone who has a vacation home or even a pull-behind-the-car camper.

As for refis, we refied a year after we bought the house in order to get rid of a second mortgage (since DH was a consultant, we were advised to preserve our emergency fund and take an 80/10 instead of putting 20% down), drop our interest rate by a good bit, and take out a little bit of money for some very necessary renovations. I don't quite understand how it happened but our monthly payment dropped by a couple of hundred dollars, too, even though we only extended the loan period by about 16 months. We do have friends (one of the two friends we have who have actually been able to buy houses) who refied to pay off their credit cards but they had the sense to cancel their credit cards - most people don't!

wow, i guess i never realized some people don't get a paid vacation, even if just 1 week..

Self employed people don't necessarily get vacation. I think the other poster was referring to those guys.

Qdog, more than 1 in 4 of American workers in full-time employment (working for someone else, not freelancers, independent contractors, or self-employed) get no paid vacation.

traciae, are you sure about that '03 date? We got a 4.67% fixed on a 15 year in April of '04.

I think they just aren't calling time taken off from work a vacation for many. Many companies just have paid time off, not specified for purpose. My self-employed DH will have taken off more than two months during this year. I don't think "vacation" has to mean leaving home.

Gloria

48% of what sample size? I find it highly unlikley that % is accurate..I don't know anyone not taking a vacation, not 1...Heck, most have a vacation home...

Most of your colleagues and friends have vacation homes? Wow (please don't take this the wrong way) that's a skewed population.

Our wealthier friends/acquaintances are all taking 2-3 week vacations going off to some place this summer. But like Johnmari, we know lots of people who aren't taking the long vacation (that would include ourselves).

wow, i guess i never realized some people don't get a paid vacation, even if just 1 week..
Getting one week of paid vacation isn't much time - that's usually eaten up sometime during the year for little things (e.g., sick children, sitting at home waiting for deliveries, long weekends).

When I was working, two weeks of annual leave was nothing. When I got 3.5 weeks of annual leave, I usually could bank even time for a 5-day vacation but rarely longer.

How can a full time employee get no paid vacation? I work in employee benefits and don't understand that one.

I do understand people taking vacation time to stay home. That's what I do.

Last time I went anywhere on a vacation was 2 years ago. I have no plans to go anywhere anytime soon. I take days off just to catch up on house cleaning and yard work. LOL! Oh, and for a breather after showing/trialing my dog locally. And, to drive 4 hours to the IKEA in Michigan. :)

This country needs the mininum 4 weeks of vacation that the rest of the world gets. (Among other things.)

Meanwhile, the primary drivers of consumer spending are employment and income growth, which have held up over the last year, they say.
What country are they living in, where income growth has 'held up'?? Real wages are down in recent years for most people.

Consumer spending did slow in the first quarter, but to a strong 3.8 percent annual rate of increase from a torrid 4.2 percent pace at the end of 2006.
Since most people get at most a 3% raise every year, and in many cases health insurance costs go up 5-10%, this is clearly not sustainable.

I wonder when economists will start realizing that when companies use all their money to pay their CEOs $50 million bonuses, and underpay the people who actually do the work of the company, that it's bad for the economy in the long run? All those employees are consumers. People can live on credit for a long time, but not forever.

This country needs the minimum 4 weeks of vacation that the rest of the world gets. (Among other things.)
Ughhh, I don't want to be like those other countries. Look at the total picture, do you really want to have that?

"This country needs the minimum 4 weeks of vacation that the rest of the world gets."

I'd hate to be limited to *only* 4 weeks of vacation. I work for the federal government and get a total of 8 weeks (39 days) of vacation and sick time. That's 26 days of annual leave and 13 days of sick leave. Plus, if I don't take it all one year, I can carry over up to six weeks of vacation into the next calendar year. Consequently, this year I have 11 weeks of vacation I could take. (Sick leave carryover is unlimited.) Not to mention the fact that we get an additional 2 weeks (10 days) worth of holidays off. As a civil servant, I want to take this oportunity to thank all of you wonderful taxpayers for my excellent benefit package! Your tax dollars at work, lol.

Well, we've been here almost four years...so...yes, that would be summer '03 that we got the 4.78%, 15-year rate. (We got a 1/4% off that because the loan came from the bank DH works for & they do that for employees as a company benefit.) I know that rates dropped to 4.75% just a couple days after we locked 'cause it ticked us off! lol I sure don't remember them going that low the following spring but, hey, my memory is far from perfect. Doesn't change my point though about the re-fi(s) not saving all that much every month.

I just did some quick Googling about paid vacation time. A glance turned up several sites quoting that 37% of woman earning $40K or less receive zero paid vacation time. (Don't have the time or energy to check sources, etc.)

/T

No, cmarlin, I was not talking about self-employed people. And as for 'Ughhh, I don't want to be like those other countries. Look at the total picture, do you really want to have that?' Yes, I would. Among other things, a system in which such things as healthcare are not at the whim of the employer would stabilize a lot of lives. If it weren't for the huge jump in my healthcare costs due to changing jobs - new copays are much, much higher - we would be able to keep our house. (Guess that's my own fault for having the bad taste to get a chronic illness and not recover or die. :-) I'm very grateful for the coverage I do have, of course, considering I spent the first 2 1/2 years I was ill with no medical care whatsoever. But it doesn't make it any more pleasant when a prescription that cost me $10 in December now costs me $50 or more.)

'How can a full time employee get no paid vacation? I work in employee benefits and don't understand that one.'

Before I became disabled in the mid-1990s, I had never received either paid vacation days, paid holidays, or paid sick days: I didn't work, I didn't get paid, it was as simple as that. I don't know what there is to understand or not understand. I worked in the restaurant business - almost entirely for independents, not chains, since I preferred actually cooking to reheating and assembling prepackaged stuff. ;-) Most of my friends and family are at the lowest income levels (some of them make not much more than minimum wage) and work for smaller companies, and those two factors tend to drastically reduce access to benefits like paid time off. The more you get paid in the private sector, the more likely you are to get paid time off and other nice bennies... at the other end, you get to be happy you have a job at all. (Anyone read Barbara Ehrenreich's 'Nickel & Dimed'?)

In the US there is NO 'right' to paid time off of any kind; even the FMLA provides only for unpaid time off, which in the lower income levels is a joke. The Fair Labor Standards Act says specifically that there is no legal right to pay for hours not worked (even for Federal holidays where the employee may be involuntarily prevented from working because the workplace is closed). I have posted a link below to the report from the Center for Economic and Policy Research on vacation/paid leave time in the US versus other countries.

Here is a link that might be useful: 'No-Vacation Nation'