by Calculated Risk on 3/22/2005 09:24:00 PM

This month's Forbes has an article about homeowners extracting equity from thier homes to "finance consumer expenditures". The article discusses several issues: the low savings rate, noting that "the personal savings rate has fallen from 6% of GDP 12 years ago to a mere 1% now", mortgage equity extraction (with a nice chart), and they hint at the link between equity extraction and the trade deficit.

If Forbes had taken the next step, they would have compared equity extraction to GDP growth (see: "Mortgage Debt and the Trade Deficit") and they would have asked what is the impact on trade and GDP if housing slows (see my musings "Housing and Trade: Virtuous Cycle about to Become Vicious?")

If housing slows that will end the equity extraction game. With rising interest rates and higher energy costs, a housing slow down is probably imminent and inevitable. Trying to determine the impact of an impending housing slow down on the general economy is the next puzzle.