lfb.org / By Douglas French /
Memories are short, and 2008 is ancient history. Consumers can’t suppress their urge to consume. Lenders can’t suppress their urge to lend. We’ve learned nothing from the last boom-bust. We are repeating it, piling error upon error.
“People will spend more of their equity,” Chris Christopher, an economist at IHS Global Insight in Lexington, Mass., tells Bloomberg. “It won’t be as much as they spent when prices were gaining at a rapid pace in 2005 and 2006, but it should have a positive impact on consumer spending.”
As you may have detected in Mr. Christopher’s statement, bankers (speaking of short memories) are back in the business of making home equity lines of credit — HELOCs — and consumers are ready to ramp up the good life again.
Bloomberg reports:
“After six years of declines, lending for so-called HELOCs will rise 30%, to $79.6 billion, in 2012, the highest level since the start of the financial crisis in 2008, according to the economics research unit of Moody’s Corp. Originations next year will jump another 31%, to $104 billion, it projected.”
This borrowing will spur consumer spending, which, according to Bloomberg, is the largest party of the economy. The Mortgage Bankers Association’s crystal ball predicts home prices will gain 8% this year, and, in turn, Bloomberg reports, “The amount of equity homeowners had in the second quarter rose by $406 billion, to $7.3 trillion, the highest level since 2007.”
