Monday, 20 April 2009

The housing equity economic cycle

There is something sad about our dependence on home equity withdrawal. When it goes up, the economy booms; when it goes down, the economy dives into a recession. Our economic fortunes have become utterly dependent on whether house prices rise sufficently quickly for home owners to borrow and consume against their imagined increases in housing wealth.

However, under New Labour this dependence on home equity withdrawal reached grotesque proportions. The government and the Bank of England have risked everything on stabilising house prices and re-establishing household sector credit growth. They have forsaken fiscal stability, cut interest rates to almost zero and started to print money. Yet despite every crazy policy gesture, home equity withdrawal has not recovered.


Flo said...

So, we have been at it since 1970.

Canada Realtor said...

It takes a lot of time and hard work to get the home equity withdrawal levels to normal. It's very dependent on the home equity loans and those are not the biggest "seller" these days.

Take care, Elli

shtove said...

Do you have to call it that, equity withdrawal? It's such a creepy marketing tag.