Home equity loans tapped out?

I n every holiday shopping season from 1995 through 2005, Christmas was on the house. Not this year. The housing downturn that started last year and has accelerated this year has barred the chimney to Santa in many homes, as owners find they no longer have the growing equity that can be tapped again and again to finance spending. Preliminary figures for sales on Black Friday, the day after Thanksgiving, were mixed.

Market watcher ShopperTrak RCT said sales per person were down 3.5 percent compared with a year earlier. But overall sales totals rose 8.3 percent. Financial firm UBS said sales were on track for the weakest performance since 2002. “People have been using their home as a very large ATM for a number of years,” said Keith Leggett, senior economist at the American Bankers Association in Washington.

“With housing values declining, rising defaults and greater concern about excess of risks, clearly we’ve seen banks pull back on underwriting. They’ve tightened their terms of credit.” The shift is one of a number of factors, from changes in household income to rising oil prices to changes in consumer mood, that will play a role in spending decisions.

“It’s part of a larger picture, where, if a family is stretched and they have exhausted their resources for borrowing, then some people are hitting the wall,” said Joe Belew, president of the Consumer Bankers Association, a banking trade group based in Washington. Still, he questioned whether home equity will be a deciding factor in Christmas retail sales. “I don’t think you go to the department store and buy a pair of shoes on your home equity line of credit,” Belew said.