A home can be the biggest investment account some households will ever have, thanks to the rapid appreciation in value in many Valley neighborhoods. But an increasing number of owners are tapping into their nest eggs. In metro Phoenix, where many neighborhoods have posted annual price gains of 10 percent or more since 1995, there can be plenty of equity to take out. Vassilis Lekkas, an economist at McLean, Va.-based Freddie Mac, said the percentage of homeowners taking equity out of their homes last year rose to rival that of the late 1980s when the economy was headed down.
Equity is the value a home holds for the owner over what is owed on it.
Economists are concerned about what homeowners are doing with the equity they take out of their homes. Many are using it to pay off credit cards, buy cars or take vacations, instead of putting it back into home improvements that will increase their home values. Jay Luber of the Phoenix-based mortgage firm Lifestyle Lending Groups said there has been a tremendous amount of home equity used for debt consolidation in the past few years. The cashing out of equity has been tied to the refinancing boom. A growing number of people have recently chosen to take extra cash out of their homes when refinancing, according to the Freddie Mac survey.