Retailers are suffering this year, in part because consumers are no longer drawing on home equity lines of credit to fund unnecessary purchases.

Bloomberg reports:

“The drop in home values is contributing to the decline in spending because home equity was a major source of cash for purchases of expensive items like autos during the housing and credit booms…

U.S. consumer confidence collapsed this month and home values plunged in December, the latest evidence of a deepening economic slump that Federal Reserve Chairman Ben S. Bernanke today warned may last into 2010.”

Using a HELOC for everyday purchases is never a smart idea. However, the economy seems to have gotten used to the influx of cash coming from equity lines. Now that home values are on the decline, people are left to go shopping with the money they have on hand.

See Also:

Is a HELOC Right for You?

HELOC vs. Home Equity Line

Tags | Heloc, home equity line of credit, spending