Data from DataQuick show that Sacramentans extracted $2 billion less (-34%) from their homes in 2007 – via refinancings, home equity loans, outright sales – than they did in 2006. For the state of California, it was $25 billion less (-21%) (Sac and CA Home Equity Extraction Table).
According to the Sac Bee, that $2.11 billion decrease in home equity extraction represents more than 2 percent of the entire Sacramento area economy.
This kind of thing is having a huge impact on consumer spending. As home prices go up, consumers can tap the equity in their homes and also feel wealther, leading to increased spending. The reverse is also true and that is what is happening now.
This is important because it shows how the arguments that housing is “contained” are false. Many jobs are tied to the housing industry and a lot of consumer spending has been a result of rising housing prices. Reverse those and you get nasty ripple effects.
In my Borders talk, I have a page headed “Housing Bust + Ripple Effects = Recession”.