Board of Governors of the Federal Reserve System

Figure 1: Equity Extractions and Available Home Equity

Billions of Dollars

Source: Freddie Mac Quarterly Refinancing Statistics and Financial Accounts of the US

The shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001 to November 2001 and December 2007 to June 2009.

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Figure 2: Homeownership, Extraction and Percent of Equity Extracted, by Age

Top-left panel: Percent Owning Homes

Source: Panel Study of Income Dynamics

Top-right Panel: Percent of Owners Extracting

Bottom-left Panel: Dollars Extracted

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Figure 3: Extraction by Available Equity and Distribution of Home Equity Gains

Left Panel: Percent of Owners Extracting

Billions of 2012 Dollars

Right Panel: Distribution of Home Equity Gains

Source: Panel Study of Income Dynamics, Distributional Financial Accounts

The shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: July 1990 to March 1991, March 2001 to November 2001 and December 2007 to June 2009

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Figure 4. Fraction Extracting by LTV and Credit Score

Figure shows blue dot and whiskers for pre-recession and red dot and whiskers for post-recession. The left panel shows the percent of owners extracting (y-axis) by LTV (x-axis). In the pre-recession period, percent of owners extracting exhibits a hump-shape, starting at 5 percent extractions for very low LTVs and peaking around 20 percent extractions for LTVs near 0.5 before falling to zero for LTVs approaching 1. In the post-recession dot and whiskers, a similar shape emerges, but the peak is lower, at extraction rates of only 7 percent. The right panel shows percent of owners extracting (y-axis) against credit risk scores (x-axis). Pre-recession, the percent of extractions rises from 5 percent at very low risk scores to just over 15 percent for risk scores near 700 before declining for higher risk scores. Post-recession, the figure is relatively flat for much of the range, with extractions near 5 percent, showing a peak at higher risk scores (just below 800).

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Figure 5: Mortgage Refinancing by Credit Score

Percent of Households

Source: Survey of Consumer Expectations

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Figure 6. Counterfactual Equity Extractions

The blue solid line shows actual extraction rates, which rise to a peak of 17 percent in 2001 before declining to 5 percent by 2010 and remaining relatively flat thereafter. The red dashed line denotes predicted extractions, which track actual extractions through 2010 (the estimation window, denoted by a red vertical bar). After this, predicted extractions rise to 10 percent before remaining near 7 percent during the recovery.

The shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001 to November 2001 and December 2007 to June 2009.

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Figure 7: Spending Response Following Equity Extractions

Panel 1: Total Spending and Saving

Panel 2: Components of Spending ex Housing

Source: Panel Study of Income Dynamics and authors' calculations

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