Cash-out Refis Held Strong in '06

Despite a slowdown in home sales and refinancing activity, homeowners extracted $460.1 billion in home equity last year, down only slightly from $461.4 billion in 2005, according to Eric Belsky, executive director of the Joint Center for Housing Studies at Harvard University.The biggest chunk came from cash-out refinancings, Mr. Belsky told the National Association of Home Builders at its semiannual construction forecast conference. According to Freddie Mac data, the number of cash-out refinances was down in 2006, but the amount of cash received at closing totaled $313.9 billion, compared with $270.3 billion in 2005. Based on Mr. Belsky's estimate, homesellers spent $70.2 billion of the cash they pocketed at the closing, compared with $78.7 billion in 2005. Meanwhile, new second-mortgage debt totaled $76.0 billion last year, down from $112.4 billion the previous year. Homeowners continued to use their homes like "piggy banks" last year to support their spending, he said. "This is not likely to be sustained in an environment with prices starting to fall."