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Home Equity ATM Flashing "Out Of Order" Despite So-Called Recovery

Tyler Durden's picture


The 19% increase in the Case-Shiller home price index since March 2012 is widely thought to have boosted the prospects for overall household spending via the “wealth effect” transmitted by rising prices and cash out refinancing. But as Bloomberg's Joseph Brusuelas notes, claims that spending is about to snap back should be interpreted with caution.

The bifurcated nature of the overall expansion, and deep divisions within the U.S. economy due to increasing income inequality, has accelerated since the recovery began in mid-2009. There is little evidence that the bottoming out of cash out refinancing is translating into rising demand for the moribund service or non-durable retail sectors. Perhaps a lesson for Ms. Yellen here?


Via Bloomberg,

Homeowners with negative and near-negative equity in their homes are incapable of refinancing and this constrains overall personal consumption. Outstanding mortgage debt is down $1.7 trillion since the peak in 2008, according to the latest Federal Reserve flow of funds data; that is mostly due to foreclosures, mortgage modifications and short sales.

During the 2002-2007 U.S. housing bubble there was a strong correlation between cash out refinancing and an increase in durable goods spending. In the post-crisis economy, the gains in home values are not uniform and the resurgence in cash out refinancings is not enough to significantly power spending on goods and services.


Cash-out refinancing activity bottomed in the second quarter of 2011 when homeowners extracted $9.5 billion from their homes...


but durable spending has risen...


as non-durable has continued to slide significantly...


So it is clear that households are not using the cash from their house ATM but are levering up using other sources (cough free money car loans cough).

What the Fed wants is to juice the housing market in order to create piggybank of sorts for households to revert to their mean of spending what illusory welath they have... it's clearly not working.

The inevitable outcome of this is that the more households soak up cash from other sources, the more desperate
the Fed will be to push housing higher as it is the only remaining viable
source of cash out.


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Wed, 10/09/2013 - 12:09 | 4038114 firstdivision
firstdivision's picture

WTF!?!  You're telling me that I cannot take out a 5th equity line out on my house?  I'm only 47% underwater.

Wed, 10/09/2013 - 12:18 | 4038156 camaro68ss
camaro68ss's picture

Now more then ever is a great time to buy! hahaha

Wed, 10/09/2013 - 12:24 | 4038179 Keyser
Keyser's picture

Much like private investors are being lured back into the stock market at the same time that insitutional investors are heading for the door. 

Wed, 10/09/2013 - 12:26 | 4038190 yogibear
yogibear's picture

But isn't that Wall Street has been waiting for over 4 years?  Another huge transfer of wealth.

Wed, 10/09/2013 - 12:32 | 4038209 Skateboarder
Skateboarder's picture

The bifurcated nature of the overall expansion, and deep divisions within the U.S. economy due to increasing income inequality, has accelerated since the recovery began in mid-2009. There is little evidence that the bottoming out of cash out refinancing is translating into rising demand for the moribund service or non-durable retail sectors. Perhaps a lesson for Ms. Yellen here?


Wed, 10/09/2013 - 12:39 | 4038231 donsluck
donsluck's picture

One must remember that the words "recession" and "recovery" are DIRECTIONS, not levels. If you drain your swimming pool, the level is receding. As you re-fill it the level is recovering. Draining it may take 8 hours, but filling it to the original LEVEL could take a week.

Wed, 10/09/2013 - 13:10 | 4038360 TBT or not TBT
TBT or not TBT's picture

The new SF Bay Area house I bought a year ago is up almost 40% in a year. That's some bifurcation right there.

Wed, 10/09/2013 - 13:15 | 4038401 rlouis
rlouis's picture

Better book them profits while you can.

Wed, 10/09/2013 - 13:42 | 4038507 SunRise
SunRise's picture

So how much have incomes risen in the past year in SF?

Wed, 10/09/2013 - 12:39 | 4038228 TheGardener
TheGardener's picture

Unaffordable housing is great, rising prices are felt as increasing wealth to the debt slaves so they can take
on even more debt.

How insane. And unbelievable people buy this BS because
they get poorer the deeper they sink into debt and the lower the wages they have to accept to just keep up serving those mortgages.

But the "wealth effect" is supposed to make them buy useless crap from foreign lands hence we can book outright and
idiotic wealth destruction as "growth".

Wed, 10/09/2013 - 13:12 | 4038390 TBT or not TBT
TBT or not TBT's picture

Unaffordable housing is great for family formation, so we will have a healthier civil society going forward. A fundamental transformation we can believe in. It was such a mean country before.

Wed, 10/09/2013 - 12:10 | 4038119 Oh regional Indian
Oh regional Indian's picture

The great American dream continues to unravel into the great american nightmare. 

Wed, 10/09/2013 - 12:25 | 4038185 Keyser
Keyser's picture

All designed by the men behind the curtain.


Wed, 10/09/2013 - 13:23 | 4038436 Oh regional Indian
Oh regional Indian's picture

2013 = 1929

Wed, 10/09/2013 - 13:40 | 4038492 TBT or not TBT
TBT or not TBT's picture

But in high definition. Unless we get an EMP reset, then it will look like The Road a little, but with nature still operating.

Wed, 10/09/2013 - 12:30 | 4038202 Renewable Life
Renewable Life's picture

Just like a real ATM, it's just out of order to allow for it to be re-stuffed with cash!!!

Enter Sugar Momma Yellen, who will print so much cash, she'll drive the mortgage rate on a 30yr to 2.1% and the 10 yr TBill to .5%!!! (Oh and billions a month can keep pumping into the "short PM on paper trade too, we can't let that cat out of the bag)

That should get the ol refi game primed and running again!! That's the plan, it's all they got, so there gonna do it!!!

Wed, 10/09/2013 - 13:19 | 4038415 disabledvet
disabledvet's picture

Fed can't do much about prices relative to a bubble. this is an EPIC beta rollover. i agree with ORI above..."there was a plan." but i highly doubt the plan was to create bubble number three of the last three decades. if it was Taper this summer put the Fed on record as not being too happy about it. so these products are now going to have to compete in the marketplace (Tesla's, solar installations, cloud computing systems, wind power, 3-d printing, carbon based materials, rapid production.) the good news is that these products and systems are now in the market place. a sell off like today only accelerates the build out.

Wed, 10/09/2013 - 12:13 | 4038124 NotApplicable
NotApplicable's picture

Wow, it blows my mind that anyone, let alone the people at Bloomberg put forth the idea that this is a bad thing.

I'm also amused how the MSM only discusses how the impossibility of refinancing is due to underwater mortgages, rather than the fact that many borrowers no longer have a good enough credit score to qualify.

Wed, 10/09/2013 - 12:42 | 4038235 donsluck
donsluck's picture

They also do not consider the possibility of debt revulsion.

Wed, 10/09/2013 - 13:22 | 4038433 disabledvet
disabledvet's picture

well...if you've plowed you home equity into solar stocks, new engine technologies, tesla drive systems've done far and away better than by putting a new door on your front porch. having said that these pullbacks can be severe.

Wed, 10/09/2013 - 12:14 | 4038131 maskone909
maskone909's picture

Homeowners with negative and near-negative equity in their homes are incapable of refinancing and this constrains overall personal consumption.

isnt this what HARP loans should be helping?

Wed, 10/09/2013 - 12:18 | 4038159 maskone909
maskone909's picture

from the gov website


You may be eligible for HARP if you meet all of the following criteria:

  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • The current loan-to-value (LTV) ratio must be greater than 80%.
  • The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.


ok i guess the LTV ratio isnt that helpful but its better than nothing.  however i do hear that the new HARP program in the works will have a more beneficial LTV requirement taylored to underwater owners.  we will see

Wed, 10/09/2013 - 12:44 | 4038241 donsluck
donsluck's picture

Pardon me, but how is allowing people who couldn't manage their debt before get more in debt "helping" them?

Wed, 10/09/2013 - 13:02 | 4038311 TheGardener
TheGardener's picture

"Pardon me, but how is allowing people who couldn't manage their debt before get more in debt "helping" them?"

Welcome to socialism. Social democrats, nationalists and all
their unreformed friends are in the business of helping people out of their misery by keeping them there.

Wed, 10/09/2013 - 13:13 | 4038393 swmnguy
swmnguy's picture

No, this is not "Socialism."  This is creating a class of debt serfs in thrall to private corporate financial interests.  The use of State mechanisms to do so is the giveaway that this is not "Socialism."  The merger of State and Corporate power is Fascism, not Socialism.  The end result is a neo-feudalism, in which the Corporation takes over the role of the Church as the partner in power to the State, and where eventually there is no discernable difference between the State and the Corporation (or Church).  An excellent example of this is ACA, aka "ObamaCare," the central pillar of which is mandatory taxes (as defined by the SCOTUS) to be paid to private insurance companies, enforced by the power of the State.

Not Socialism.  And when somebody tells you it is Socialism, that's someone who is actively trying to mislead you, while working for the synthesis of State and Corporate power themselves.

Wed, 10/09/2013 - 13:39 | 4038485 IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

Perfect clarification.  I never cease to be appalled that, with the wealth of information being supplied at sites like ZH, there are so many commenters who remain completely oblivious to what real definitions actually are.  How one whines about "socialism" while on average things just get worse and worse for the average person is just epic FAIL to me.

Wed, 10/09/2013 - 13:45 | 4038510 TBT or not TBT
TBT or not TBT's picture

Socialism makes life worse for the average person, looking at the history of it. Central planning makes life worse for almost everyone.

Wed, 10/09/2013 - 15:07 | 4038790 IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

Central planning makes things better for the politically connected, though.  You still are suffering from definition fail here though.  What is happening is not "central planning" it is corporations using their pals in .gov to extract more money from the peons.  THAT IS NOT SOCIALISM.  You are just throwing around buzzwords that your masters have told you are "bad".

Wed, 10/09/2013 - 14:40 | 4038683 TheGardener
TheGardener's picture

"Social democrats, nationalists and all
their unreformed friends"

I slipped in the fascists in all their measure.

Wed, 10/09/2013 - 13:12 | 4038375 maskone909
maskone909's picture

i guess there is two camps:

there is the ones who blame the people who got themselves into a housing market that proved in the end was impossible to manage. (this is where you fit in, along with the likes of jamie dimon and blankfien)

and there is those who place more blame on the financial institutions that turned the housing market into a crap shoot.  Those that see the manipulation of Americans who have been conditioned into thinking owning a home is a birthright and part of the American Dream(TM.) 

if lowering the LTV requirements helps some poor mom who cant afford to keep her family in a house because her husband died or left, then i guess its cool.  i guess i just see it as not everyone who wanted to own a home saw it as going long S&P futures or something. 


Wed, 10/09/2013 - 13:18 | 4038416 swmnguy
swmnguy's picture

The house itself doesn't make any difference.  The same game is running in Education finance, Auto finance, Retirement Finance, Health Care finance, you name it.  The only objective is to have some self-perpetuating form of debt that can be associated with a Social Security Number.  Without that ever-increasing debt, there can be no ever-increasing supply of Money.  It really doesn't matter if the debt is ever repaid.  Actually, it's better if it isn't, because then we have all this newly created money, plus we can seize and re-sell, re-hypothecate the asset, and use it to create even more Debt/Money.

The basic problem is that you can't have a system that depends on infinite energy, resources, markets and money; where money is actually debt and can be bought and sold like anything else.  Of them, only money can be made infinite (money), and that only by making it imaginary.  That creates its own problems and contradictions, as we see all around us.

Wed, 10/09/2013 - 13:33 | 4038476 maskone909
maskone909's picture

yeah i agree

but good luck explaining that to a population that is glued to "reality" tv- which is a form of gladiatorism that pits individuals against eachother for some bullshit prize, usually of minimal value, at the praise of some "judges"

Wed, 10/09/2013 - 14:49 | 4038714 TheGardener
TheGardener's picture

Owning your dwelling debt free is as defending your birth rights, gambling on it with debt is speculation, taking
chances on increasing value for feeling richer is financial suicide.

Wed, 10/09/2013 - 12:14 | 4038132 Dr. Engali
Dr. Engali's picture

Well it's a good thing that banks started stashing moar money in the ATMs ...just in case. We wouldn't want any accidental catastrophes...only planned catastrophes.

Wed, 10/09/2013 - 13:28 | 4038460 TheGardener
TheGardener's picture

Once this bank-run-phobia is made non-incendiary because
people have no cash in the bank to run after ; NWO is set up.

But no cash no rules, so let`s cheer them up on their way
to a cashless society where they think they have total control.

When the concept of money dies - and that does not need to be PM`s or shells- hell is on and all greed will freak out,
kill the reward methodology to kill a civilization.

Wed, 10/09/2013 - 12:18 | 4038149 Serfs_Up
Serfs_Up's picture

Old Yellen is gonna take the fall for all this she stupid or what?

Wed, 10/09/2013 - 12:20 | 4038161 NotApplicable
NotApplicable's picture

I'm sure she has a whole deck of "Blame Bernanke" cards.

Wed, 10/09/2013 - 12:29 | 4038199 Seasmoke
Seasmoke's picture

How the fuck does Greenspan get away without 52 cards of blame on him ?

Wed, 10/09/2013 - 12:21 | 4038174 Hang Em High
Hang Em High's picture

Yes,(he/she/it) is stupid..........

Wed, 10/09/2013 - 12:24 | 4038182 Al Huxley
Al Huxley's picture

Go with "Ol' Yellen" - what a fucking awesome tag line.  And only 1 day after the announcement...

Wed, 10/09/2013 - 12:34 | 4038216 Serfs_Up
Serfs_Up's picture

My apologies to dog lovers everywhere

Wed, 10/09/2013 - 12:18 | 4038152 ghostfaceinvestah
ghostfaceinvestah's picture

Don't worry, cash outs are coming.  Now that the refi boomlet is over, mortgage originators will be desperate for any and all kinds of volume.

And of course the Fed, in its role as bank regulator, will do nothing.

Wed, 10/09/2013 - 12:21 | 4038165 tahoebumsmith
tahoebumsmith's picture

With the so called recent housing boom, homeowners are barely getting their heads back above water never mind having an atm machine to go along with it. Home prices in most areas are still more the 25% lower then they were in 06. Even with the cram downs people still are underwater and making payments on the income tax portion of the write downs. The only reason the housing market recovered as much as it has is because Wall St. bought the majority of the inventory and now rent it back the sheep they foreclosed on. This is not a consumer driven housing recovery, it is a total insider investment scam for those privledged enough to get invited to the party.

Wed, 10/09/2013 - 12:25 | 4038181 adr
adr's picture

In 2006 my house was worth $160k. I bought it in 2009 for $130k. 

Based on the past five years of bullshit statistics, I should be in really good shape.

Nope, I can't get any offers priced at $120k. My neighbor sold his house for $106k.

My dad paid $175k for our house in 1986. It just got appraised for $205k. 

Wed, 10/09/2013 - 12:27 | 4038191 Seasmoke
Seasmoke's picture

But I bet your property taxes are going up higher each year!!

Wed, 10/09/2013 - 13:02 | 4038321 rpboxster
rpboxster's picture

All of the idiots in my town just VOTED for a property tax increase of almost 10%.  Thanks, neighbor.

Wed, 10/09/2013 - 12:32 | 4038210 lasvegaspersona
lasvegaspersona's picture

Vegas housing market down 1% last month. 47% were cash sales. 

It is not a consumer market, strictly for the pros.

Wed, 10/09/2013 - 13:30 | 4038462 disabledvet
disabledvet's picture

yep. "and all that money has been plowed into equities." huge returns but almost zippo when it comes to the economy. the Fed can't lower rates fact it did the exact opposite this summer. now real rates have moved materially higher along with margin requirements. looks ugly i agree...but technically speaking the system is working. market recoveries should be grounded in sound economic fundamentals. this one has been...below average.

Wed, 10/09/2013 - 12:48 | 4038251 donsluck
donsluck's picture

You forgot to mention the exemption from anti-money laundering laws enjoyed by real estate.

Wed, 10/09/2013 - 12:22 | 4038169 adr
adr's picture

Because the price rise is completely fake. Well other than the 1% housing market for money laundering.

The other increases were from areas where forclosed homes went for double what they did, thanks to REITs bidding up properties. This significantly increased the average selling price in an area, but this just masked the overall decrease in prices of owner occupied homes with current payments.

The NAR claims prices in my town have risen 12% over the past year. Must be why homes that were listed at $135k last year are selling for $100k. Buyers just didn't get the memo.

Wed, 10/09/2013 - 12:40 | 4038225 Winston Churchill
Winston Churchill's picture

The heldback zombie inventory is causing the whole rise.

Very few properties actually on the market here in s.Florida.

Price reductions on the few left,bubble is deflating but most sellers are in denial.

Wed, 10/09/2013 - 12:20 | 4038172 Newsboy
Newsboy's picture

Brace for impact!

Wed, 10/09/2013 - 12:34 | 4038196 Mercury
Mercury's picture

Home Equity ATM Flashing "Out Of Order" Despite So-Called Recovery



As previously documented those who are benefiting most from RRE appreciation  are higher end home owners, those who can and do pay cash and those benefiting from holding sought-after ‘supply’ in foreclosure stuffed markets. Their corner of the market is getting an artifical market boost, they are already loaded, have become more so thanks to QE or some combination of the three.


In any case these people are generally not in the same demographic as those who tend to seek out home equity loans.


Wed, 10/09/2013 - 14:04 | 4038579 TBT or not TBT
TBT or not TBT's picture

QE benefits those with first access to money, including upper middle class people with good credit and good jobs.

Wed, 10/09/2013 - 12:30 | 4038200 yogibear
yogibear's picture

Step right on up and take the fall Janet Yellen.

Wed, 10/09/2013 - 12:38 | 4038220 Die Weiße Rose
Die Weiße Rose's picture

Deus ex Machine 1984

as long as people loose their Jobs - there will be No Recovery.

it looks to me like more and more people could loose their Jobs....

Computers and Robots do all the work now!

and Machines and Robots just don't care.

so fuck all the consumer-people!

vive la Robot Revolution...

Deus ex Machine.

Wed, 10/09/2013 - 12:45 | 4038239 Mercury
Mercury's picture

Tell that to Obama and the leftist/statist complex.

If computers and robots do all the work now why does the government have to keep getting bigger and more expensive?

Wed, 10/09/2013 - 12:51 | 4038269 donsluck
donsluck's picture

The answer is self-evident. How do you get food clothing and shelter without work? You must be supported or there may be a revolution. You fail to realize that with ever increasing efficiency, there must be ever increasing leisure. Take your leisure.

Wed, 10/09/2013 - 14:06 | 4038585 TBT or not TBT
TBT or not TBT's picture


Wed, 10/09/2013 - 12:39 | 4038223 solidsteele
Wed, 10/09/2013 - 12:42 | 4038237 Jadr
Jadr's picture

While the Feds and bankers might want to consumers to take out of their homes to increase consumption I think that many Americans have learned their lesson on this as those paper gains being used to buy junk can easily be wiped out.  Americans as a whole aren't very quick learners but I think the housing crash stung enough to knock some sense regarding this issue into enough of them.  I was at a SFR conference and they were speaking about the amount of spending from home equity loans during the bubble years and while I can't remember the exact number I believe it amounted to a source of 30%+ of all consumer expenditures.  I think even an idiot can see that spending like that is unsustainable (at least in hindsight) but of course our policy makers want to bring it back and look towards those numbers as though they were the glory years.

Wed, 10/09/2013 - 12:48 | 4038244 NOZZLE
NOZZLE's picture

How in the hell could Durables be above 2007 levels?

As a side note, if the fED's plan was to reinflate the economy thru targeted asset inflation they have failed miserably and they are at the end of a 6 year year expansion cycle to top that off.

Wed, 10/09/2013 - 12:56 | 4038284 NoWayJose
NoWayJose's picture

So home prices are up 19% in a year and a half, while the Fed says inflation is only 1.2% a year? What are they measuring?

Wed, 10/09/2013 - 13:25 | 4038291 socalbeach
socalbeach's picture

The following quote from the article may be true,

"What the Fed wants is to juice the housing market in order to create piggybank of sorts for households to revert to their mean of spending what illusory welath [sic] they have... it's clearly not working."

but I think a more important consideration for the Fed is to prop up mortgages (collateralized by houses) which are on the asset side of the member banks' balance sheets.

Wed, 10/09/2013 - 13:14 | 4038397 wcvarones
wcvarones's picture

It's not just not being able to suck out home equity.

What kind of moron would want to suck out home equity?

Wed, 10/09/2013 - 13:19 | 4038413 j0nx
j0nx's picture

Every crash needs a scapegoat. Old Larry knew that and declined. Hard to believe Janet doesn't know that she will be the bagholder.

Wed, 10/09/2013 - 13:20 | 4038417 Serfs_Up
Serfs_Up's picture

Somehow, seeing all the "Fuck Ole Yellen" posts on the ZH won't make me feel any about you brothers?

Wed, 10/09/2013 - 14:12 | 4038601 TBT or not TBT
TBT or not TBT's picture

We are experiencing multiple emotions simultaneously, not just rage.

Wed, 10/09/2013 - 16:59 | 4039197 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

another thread another poster threw out Mrs Debtfire I like it better

Wed, 10/09/2013 - 14:27 | 4038645 evernewecon
evernewecon's picture




(Price Dispersion By Way Of

Barry Ritholtz early on in the 

mortgage bubble (that I think the 

Fed/Treasury's trying to reflate and

convince everyone is reflated and /or

that it wasn't such a bubble really,

even though the banks created the

mortgage bubble.)



How the Case Shiller Index may happen

to contribute to a misleading picture,

particularly when combined with the 

above dynamic.



The Fed itself sees a bubble:



With Shadow Inventory

Like This, Who Needs 

Residential Shadow



Impending wave supply?





The Shadow Inventory Is Still

Huge And Simply Pushed


And besides the delinquencies, remember 

the millions still underwater who can't sell

without having to pay in to the mortgagee.



Wed, 10/09/2013 - 16:10 | 4039042 W74
W74's picture

TY for the links.  Good stuff from what I saw, though obviously I did not go through all of them.  This Mark Hanson guy seems to be the most honest realtor around, he certainly shoots it straight and doesn't let fantasy cloud his decisions when it comes to his business.

Do NOT follow this link or you will be banned from the site!