Homeowners pulling less equity out of their houses

WASHINGTON—Falling home prices and tighter lending standards are preventing more homeowners from pulling money out of their homes, Freddie Mac said Friday.

In the first three months of the year, 56 percent of homeowners refinanced their mortgages and "cashed out" at least 5 percent of their equity. That's a four-year low, and down from the peak in mid-2006 of 88 percent, according to the McLean, Va.-based mortgage finance company.

Homeowners' inability to tap their home equity often affects their spending and investment decisions, which is why economists watch the rate so closely.

From January through March, Freddie Mac said borrowers cashed out $29 billion in home equity, down more than 19 percent from $36 billion in the fourth quarter of 2007.

The Commerce Department reported Thursday that consumer spending was up 0.4 percent, double the increase that economists had forecast. However, once inflation was removed, spending edged up a much slower 0.1 percent.

Consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, as the housing market downturn, combined with rising food costs have pushed consumer confidence to the lowest levels in five years.