The following data is calculated from the Fed’s Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity – hence the name “MEW”, but there is little MEW right now – and normal principal payments and debt cancellation.
For Q4 2013, the Net Equity Extraction was minus $US46 billion, or a negative 1.5% of Disposable Personal Income (DPI).
Click on graph for larger image.
This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.There are smaller seasonal swings right now, perhaps because there is a little actual MEW (this is heavily impacted by debt cancellation right now).The Fed’sFlow of Funds reportshowed that the amount of mortgage debt outstanding decreased by $US10.8 billion in Q4. Compared to recent years, this was a small decrease in mortgage debt and following Q3 when mortgage debt increased for the first time since Q1 2008The Flow of Funds report also showed that Mortgage debt has declined by over $US1.3 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With residential investment increasing, and a slower rate of debt cancellation, it is possible that MEW will turn positive again soon.For reference:Dr. James Kennedy also has a simple method for calculating equity extraction: “A Simple Method for Estimating Gross Equity Extracted from Housing Wealth“. Here is a companionspread sheet(the above uses my simple method).For those interested in the last Kennedy data included in the graph, the spreadsheet from the Fed isavailable here.
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