by Bill McBride on 11/04/2006 06:29:00 PM

The following chart is from the NY Times article: Mortgage Lesson No. 1: Home Is Not a Piggy Bank

Click on image for full chart.

From the article:

"In the first six months of this year, even with interest rates rising, more than $511 billion was extracted from homes through cash-out refinancing and home equity loans, and that was more than the amount taken out for all of 2005, a record year for mortgage equity extraction."

This is not correct. From the Federal Reserve Flow of Funds report, mortgage debt (including home equity loans) increased a total of $436.4 Billion in the first 6 months of 2006. Total household mortgage debt was $9,324.5 Billion on June 30, 2006 as compared to $8,888.1 Billion on Dec 31, 2005. (See line 32 in linked Fed report). Line 32 includes "loans made under home equity lines of credit and home equity loans secured by junior liens."

And that is total mortgage debt. To calculate MEW, household investment in housing has to be subtracted from the increase in total mortgage debt. This includes investment in new homes, home improvements, and various taxes and fees.

The following table is a comparison between the NY Times numbers and my estimates of MEW:

MEW Comparison: NY Times vs. CR (billions)
Year	NY Times	CR estimate
2001	$210	$156
2002	$260	$331
2003	$410	$453
2004	$458	$504
2005	$483	$540
2006 (first half)	$511	$156

In general the estimates are fairly close. However the NY Times estimate for 2006 appears to be incorrect.