The Housing ATM is Dead. Good Riddance.

I was playing around a bit with Google Insights for Search when I came across this rather telling chart.

The dark blue line below represents the general interest in real estate topics, as measured by Google. No surprise that it peaked in July 2005 and has been on a steady down trend ever since. The light blue line shows the interest in home equity loans, one of the more common ways to extract cash from the “housing ATM” during the days of exploding equity.

As of December, general interest in real estate has declined 33% relative to January 2004. Meanwhile, over the same time period, interest in home equity loans has plummeted 74%.

I think it’s safe to say that the housing ATM is dead. Let’s hope it stays dead.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

31 comments:

  1. 1

    Both Graphs have a Regression Analysis Linear Downward Though

    Could partially explain why some sales rates and even inventory is drying up? We just don’t care as much about real estate over the years, because we’re not making investment plans to buy [or sell] it as much as the past.

    “Minimum Wage” is the number three Yahoo search engine topic today….so we are definitely generally concerned about available jobs out there.

  2. 2
    robotslave says:

    Sorry, The Tim, but I’m not going to cheer for the death of the home-equity loan.

    I’m fine with going back to the days when families used them for emergencies, or to finance spending that would constitute long-term investment (property improvement, college education, etc).

    But choking off that whole category of credit? No thanks.

  3. 3
    Ray Pepper says:

    Housing ATM dead?…well its quite obvious the He-Loc is toast but the ability to buy a FLIP and profit off it is VERY HIGH now from my first hand observations at the Trustee Sales….

    Many and I mean MANY (the most I have witnessed in my 20 years) are making ALOT of money now flipping. I also want to point out MANY also have lost or acquired a nice rental because they got their money in bad..

    DD always and FIND THOSE GEMS in the decade ahead!

  4. 4
    deejayoh says:

    Tim –
    Version of your chart in my browser shows RE off 15% and HEL of 66%. Not sure what the difference is. I’d be surprised if RE interest was off only that much.

    SWE, Good to hear you are still using Y! search engine. They need the help

    Microsoft eclipses Yahoo in US search for 1st time

    Not that it matters, since Y! search is Bing under the hood anyway.

  5. 5
    Scotsman says:

    Housing ATM dead!? Damm, I was going to buy a house just so I could get the bigger boat next year.

  6. 6
    ARDELL says:

    Sad to say, but we said this back in the last housing recession in the early 90s. That people had “learned” not to use HELOCS to buy their cars and boats and things not home related, as it came back to bite them in the butt when they needed to sell their homes during the last recession.

    In fact for awhile you had to prove to the bank that the use of the HELOC was for home related improvements. Even Federal Income Tax rules were you could only deduct the interest on a HELOC to the extent the principal balance was used for home related imporovements on a pro-rata basis, and not interest on monies used for other things. Not sure where the Tax Rules stand now on that.

    The “lesson” lasted a good 10 years…maybe even 12 to 15 years or so. Then it went back to house as ATM until the sit hit the fan again.

  7. 7
    Scotsman says:

    RE: ARDELL @ 6

    “came back to bite them in the butt when they needed to sell their homes ”

    Oh please. That’s soooo 2001. Nobody trys to sell their upside down home now, they just walk away. And what good does it do if the heloc money ends up in the upside down home? The key is to move the equity out of the home and into seperate assets.

    Can’t beat ’em? Join ’em!

  8. 8
    David Losh says:

    Sorry, but debt is debt. Debt secured by the house is at 10%, debt on the credit card is 18%, or higher with fees.

    I think what you are saying is true that the price of homes went up because people converted debt to 2nd mortgages. Then banks began selling loans based on the idea of a 20% second.

    This is what I keep saying about people paying down the principal. They borrowed the money, now they have to pay it back.

    In my opinion, what you are missing is the drain this has on the economy. Number one people have to pay down debt, and number two people are going back to using credit cards with no exit strategy.

  9. 9
    David Losh says:

    RE: Scotsman @ 7

    You’re really not getting it. This is debt. Nobody owes the lender a dime. The lender is a frigging low life, similar to a land lord, but a thousand times worse.

    The lender hopes you will give him his money back, well why? The money is in circulation at least. If you give the lender the gift of cash he will just park it some place to get some other interest income.

    Why don’t these bums go out and get real jobs? That’ll teach ’em.

    They foolishly spent thier money, and now they want a hand out.

    OK, I don’t want to start a whole Reagan destroyed the social network thread, I’m just saying that lenders made a choice. It’s thier business, but if we continue to give these people cash, they will just drink it up.

    We have a whole network of lenders and minions who have fancy parties, sex, drugs, liquor, and a constant demand for more money to feed the habit. We need an intervention, at the top.

  10. 10
    WillyNilly says:

    What are the top 5 items that people used house ATM money for?

  11. 11
    Pegasus says:

    RE: WillyNilly @ 10 – BIG screen TV’s, fancy cars or BIG SUV’s, BIG vacations, BIG motor homes or boats and some type of plastic surgery like a BIG boob job or a butt lift!

  12. 12
    Blurtman says:

    RE: Pegasus @ 11 – Big motor homes, NASCAR, Vegas vacations, nail salon franchise, vacation homes, Hummer, Escalade, Bimmer, timeshares.

  13. 13
    ARDELL says:

    RE: WillyNilly @ 10

    The last short sale listing appointment I went to the owners had taken both car loans and both of their student loans and put it on the house. Then they wanted to walk away from the house. Drive away in their newish cars…with their educations intact (and their 401ks intact) and leave the house and all of its debt, including their car loans and student loan debt, in the dust.

    I was flabbergasted. I did not list the house.

  14. 14
    Blurtman says:

    RE: ARDELL @ 13 – Are you some sort of communist?

  15. 15
    David Losh says:

    Didn’t like that?

    The lender lends based on financial where with all, and asset value. If they just gave money away without any concerns, why are you defending that practice?

    We are in this mess because lenders sold securities backed by promises to pay that are based on no due diligence on the banks part. These people are criminals who stole as much as they could for as long as they could. Once they were caught it became every body else’s problem.

    Why are you defending them, and vilifying the victims?

  16. 16
    David Losh says:

    RE: ARDELL @ 13

    They weren’t eligible for a short sale, but for sure a deed in lieu of foreclosure.

    Flabbergasted?

    Oh wait, are these the people who collapsed the global economy? Well in that case, yes, we should string them up for following a legal course of action.

  17. 17
    Scotsman says:

    RE: David Losh @ 15

    Are you talking about the government?

  18. 18
    Hugh Dominic says:

    RE: ARDELL @ 13 – I would not have minded in the least if we had let the lenders fail. But now the taxpayer is on the hook for that BS.

  19. 19
    David Losh says:

    RE: Hugh Dominic @ 18RE: Scotsman @ 17

    Well, yeah, that is a good point.

    I have a blind spot about the government buying mortgages.

  20. 20
    Dorothea says:

    RE: David Losh @ 8 – I agree with you. There isn’t anything wrong with a HELOC per se. There are circumstances when HELOC debt is preferable to other types (credit card, auto loan). ALL of it has the likelihood of going south if not treated with caution and care.

    Debt used foolishly, unwisely, or without any clear understanding of how it will be repaid is is the trouble, not necessarily what it is used secure it. The trouble HELOCs represent is that people were able to obtain a much larger amount of cash far more easily than traditional credit, and they weren’t thinking about how they were going to repay it. They found suddenly themselves in too large a hole to climb out of.

    Debt is like wine – used in moderation, it isn’t a problem; used in excess, you suffer a very unpleasant hangover.

  21. 21
    Passed Doo says:

    9. David Losh
    January 11, 2012 at 5:23 pm | Permalink
    “The lender is a frigging low life, similar to a land lord, but a thousand times worse.”

    Whew, I was so confused until I read your post. I get it now. Thanks for your help.

    Today, I learned the fact that ‘landlords are low lifes’.

    Thanks for clearing that up for everyone. I have to go now to deposit my rental income check(s). You know, the one(s) that let a ‘low life’ like me take a deep breath, look around and semi-retire at 52 allowing me time to waste reading blog nonsense written by knuckleheads.

    Keep up the Good Work.

  22. 22
    Ray Pepper says:

    RE: Ray Pepper @ 3

    10 DISLIKES!!!????

    People upset with Trustee Sale Buyers??????????? We just do our tiny part to clear the inventory!! What is there possibly to dislike?

  23. 23
    Drone says:

    By ARDELL @ 13:

    Then they wanted to walk away from the house. Drive away in their newish cars…with their educations intact (and their 401ks intact) and leave the house and all of its debt, including their car loans and student loan debt, in the dust.

    Since student loan debt sticks with you forever (no mater what!), converting it into a non-recourse debt seems rather shrewd. Almost as clever as passing a law that pays for your entire tuition if you pay a small percentage and work a govt job for a certain number of years. At the very least it’s a good risk-reduction policy allowing flexibility for unexpected life events.

    I’ve heard in passing whispers that some students are even graduating, putting their entire student loan debt on credit cards, paying for a few years, and then declaring bankruptcy. They’ve realized that bad credit is temporary, and you can’t repossess a degree. Law of unintended consequences I suppose.

  24. 24
    Ray Pepper says:

    RE: Drone @ 23

    “I’ve heard in passing whispers that some students are even graduating, putting their entire student loan debt on credit cards, paying for a few years, and then declaring bankruptcy. ”

    WOW……………what an angle!! Never thought of that possibility but are credit cards still out there for students that have 10k and 20k limits???..When I was a student or post graduation my limits were MAYBE 3k….But, why would they pay 3 years post graduation..? In this recession your good to go just after graduation with sparse jobs

  25. 25
    Drone says:

    RE: Ray Pepper @ 24 – Well, defaulting immediately is fraud. Someone who pays for a while could reasonably argue that they tried to make it work, but life just got the better of them.

  26. 26
    David Losh says:

    RE: Passed Doo @ 21

    Then stop wasting time, and go get a job, or start a business.

  27. 27
    David Losh says:

    This is a bizarre little thread.

    This is debt. You don’t like when I say the home owner should pay debt off, but you do think every body should pay debt.

    What happened is we over built. Mortgages were sold to finance your pension funds. Oops.

    It was a scheme. Lenders ran one of the biggest cons in history. It’s still going on. Ray is flipping houses. Credit card use is climbing. The economy must be doing great! Right?

    This is a problem. Today’s problem is ten times worse than using an asset to secure a loan. Now we have cash money draining into down payments, and credit card debt that has no end in sight.

  28. 28

    RE: deejayoh @ 4RE: David Losh @ 27

    I Do Use Google a Lot Too, Works Better on My Server

    Yahoo’s the only one that has a good homepage [to my knowledge] with the top ten search words folks are currently using, does Bing or Google have that? BTW, no matter what search engine I use the results are almost all the same anyway….you get different results?

    Cash money draining into down payments is inferred bad like too much credt card debt? Please explain, I’m confused.

  29. 29
    David Losh says:

    RE: softwarengineer @ 28

    You’re confused?

    It’s simple. Here in Pink Pony Land the solution is getting a rebate on your Real Estate sales commission.

    The rest of the time people advocate you give your land lord more rent money while you save more money for that 20% down payment.

    It seems to me that gifting your land lord money; doing the land lord the favor of paying his mortgage, is a very important factor here. Next it’s doing a lender the favor of putting a 20% down payment of your hard earned dollars so the lender can feel good about keeping you locked into a loan.

    Last, but not least, a home buyer, or seller should just go along with these new rules of Real Estate because they can now get a rebate on the Real Estate commission. That Real Estate rebating is the ticket that makes it all better.

    So you should gift your land lord money, and make the lender feel better, because we have that old Real Estate rebate to make us feel good.

    Now over in column B of this Chinese fortune cookie source of Pink Pony reasoning we have the realities that foreclosures keep climbing, credit card debt is climbing, banks are more profitable, and the price of property is “drifting” down to a soft landing. We can tell that by this new data that people aren’t able to tap equity in the family home.

    So we are left with more debt, and a rising rental market to go along with the glut of housing units we already have.

    I think people need a strategy for getting rid of debt, that includes the mortgage, or especially the mortgage. Next people need real strategies for building wealth, rather than day trading on ETrade accounts that are owned, and managed by the same people who brought you a global economic collapse.

    People need tangible wealth. Real Estate is a part of that.

    Playing around with weird data points as a guide to your own, personal wealth, is exactly like Lotto. You pay money to play the odds.

    When I started on this ETrade train of thought a couple of financial analysts called to encourage me. Stock, bonds, and the global market are a complex way to create wealth. Real Estate is more of a meat head way.

    True analysis of your Real Estate market place costs money. Looking at random data points is just sales talk.

  30. 30

    RE: David Losh @ 29

    David I Would Agree With Some of the Premise of Your Thought

    Assuming per capita wages stagnate and/or degrade in the future; as IMO, this will put more downward pressure on prices [supply and demand of available scarce consumer cash]. A good recent example of this is gasoline, the oil cost BBL is over $100 now, yet gasoline at the pump is significantly going down anyway, they said because of weaker global consumer demand.

    The Great Depression saw the same thing, less money available to spend, lower prices can happen. This is the conundrum for globalism lower wages too, whose gonna pay retail price for i.e., flat screen TVs anymore?

    IMO, if wages just gotta collapse anyway, thank God for lower prices at the pump.

  31. 31
    Ray Pepper says:

    RE: softwarengineer @ 30

    I lost him at “You’re confused?”…but I still kept reading for sheer titillation..

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