Homeowners continue to tap equity, despite rising rates, falling sales

WASHINGTON -- Many US homeowners continue to take cash out of their homes even as mortgage rates climb and home sales slip, helping to brace the economy, economists said.

This year, Americans who refinance their mortgages are expected to draw $257 billion of wealth out of their homes, according to mortgage finance giant Freddie Mac.

That's $13 billion more than the refinancing cash-out seen in 2005 -- the hottest year of the recent housing boom.

``I would have thought the home equity extractions would have been much weaker now," said Frank Nothaft, chief economist for the mortgage finance giant.

Consumers' spending of cash extracted from rapidly rising home values has helped fuel the US economic expansion over the past few years. But the housing sector is cooling, and most analysts expect that support to falter.

With existing home sales off 7 percent in the second quarter and mortgage rates climbing, some economists see the ongoing refinancing spree as the once-hot housing sector's last gift to the economy.

``That [money] is going right back into the economy in one fashion or another," Nothaft said. ``Either it shows up through [home] alterations or shows up in consumption spending."

Nothaft said many homeowners are refinancing now before their adjustable rate mortgage resets to a higher level. Those same people are likely to have seen the value of their homes jump in recent years.