WASHINGTON Americans continued to load up on mortgage debt last year, even though the housing market was stalling, according to data released by the Federal Reserve.
Homeowners increased their mortgage borrowing by almost $600 billion in the last quarter of 2006, an annual pace of 6.4 percent, significantly faster than the rise in housing prices, according to the Fed's newest estimate of household and business balance sheets.
Mortgage debt climbed more slowly in the fourth quarter than in the third quarter, though, reflecting the slowdown in home sales.
But with prices creeping up slowly, homeowners dug deeper into their equity to keep up their spending. Owners' equity as a share of the total value of their property edged down to 53.1 percent at the end of 2006, from 54.4 percent in the fourth quarter of 2005.
Homeowner equity was almost 58 percent of housing value in 2000, and nearly 70 percent in the 1980s.
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Analysts said that homeowners continued to stretch their resources last year, when household savings rates dipped into negative territory, below zero, and that many people might be at the limit of how much they could borrow.
Dean Baker, co-director of the Center for Economic Policy Research, a left-of-center institute in Washington, said the new data raised concerns about both the short-term outlook for economic growth and the long-term retirement security of baby boomers.
"Most of the baby-boom generation is near retirement and has few assets outside their homes," Baker wrote in a research note Thursday. "If weak house prices reduce equity even further for this group, it will be difficult for them to save enough in their remaining working years to offset the loss."
Not all the new data pointed to gloomy conclusions. The Fed estimated that household wealth rose 7 percent in 2006 as the value of real estate and financial assets increased faster than the pace of borrowing.
The data also suggested that savings rates might start to edge back up as the housing market cooled. Some Fed officials argue that the plunge in savings partly reflected the boom in home ownership, which had risen to record levels as people took advantage of low interest rates to switch out of rental housing or cash in on the rising value of their homes.
With housing prices flat in much of the country and mortgage lenders scaling back on exotic loans that allow people to borrow well beyond traditional guidelines, mortgage borrowing could decline.
Zoltan Pozsar of Moody's Economy.com said homeowners had already scaled back sharply on home equity loans, taking out $20 billion in the fourth quarter of 2006, compared with $100 billion a year earlier.
Though there are signs of distress among people who took out subprime loans, which frequently offer low initial rates that go up sharply, there are only limited signs of stress among prime-quality borrowers, who make up more than four-fifths of the overall mortgage market.
