Americans are no longer thrilled to extend their debts. For the last six months, the amount we owe on credit cards, auto loans and other forms of consumer loans dropped, according to the Federal Reserve. That’s the longest decline since 1991.
The party’s over.
Home equity lines of credit are now 3% from their peak in the summer of 2007.
Americans are spending less and saving more. Homeowners are turning frugal. They’re increasingly looking for energy-saving appliances. They want to live closer to where they work.
Perhaps this recession will lead to changed spending habits, just like the Great Recession.
Leamer, the UCLA economist, believes the decline in housing prices could lead an entire generation of California homeowners to think twice about that costly remodel.
“The housing boom made us feel wealthier than we were,” Leamer said. “You refinanced based on [perceived] gains and bought an SUV. . . . [Now] we might be seeing a permanent change.”
Bell certainly counts herself among the converted. She was able to get her negative-amortization loan modified with the help of L.A. Neighborhood Housing Services, and now aims to pay off her home — not use it to finance other purchases.
“I used to think having a home was like cash money,” Bell said. “When these mortgage companies say things are getting better, I’m going to keep watching every penny I spend.”