Homeowners Less Likely to Extract Spending Money from Orlando Housing

Higher interest rates are starting to affect the Orlando housing market, as signs are popping up that demand is not as strong as it was a year ago. A slowdown in Orlando housing demand will eventually cause a decrease in sales, a lull in construction activity and a softening of mortgage lending, but what may have wider implications is the possible crimp in consumer spending.

As the Orlando housing market grows increasingly sluggish, home price appreciation will also slow. That means that homeowners who got used to tapping into their homes equity to get extra cash won’t be able to refinance as easily. A 2002 Federal Reserve study “found that the average household extracted $26,700 in equity with each refinancing. One third of that money was used to pay off old debts or add to savings; but the other two-thirds were spent.” Consumer spending is expected to drop between a quarter and a half a percent now that homeowners are less likely to get extra cash from their Orlando housing.