For years homeowners have been using their soaring-in-value homes as ATMs, drawing money out to finance whatever they wanted. No more. Falling home prices mean that your house is no longer a source of cash.
The NYT has a cute quote from one such strapped homeowner:
“It used to be that if I wanted it, I’d just go and buy it and finance it,” Mr. Whittey, 33, said. “I’m feeling the crunch, and my spending is down significantly.”
The bad news is that people like Mr. Whittey were driving the economy. The Times says that 9% of the nation’s “disposable income” came from people accessing the equity in their homes.
“We used to go out to eat three or four nights a week,” Mr. Whittey said. “Now, we don’t go out at all.”
Party’s over, dude.