By Alison Rice. For Woodstock Building Associates, 2002 has been the year of the $300,000 remodeling job. Jobs of that size are uncommon for the Woodstock, Conn., builder and remodeler, says Doug Porter, the firm's managing partner, and this year it's got two. "People are taking advantage of the equity they have in their houses," he says.

Such news wouldn't surprise economist Paddy Jilek at investment bank Credit Suisse First Boston, who recently released a report on the "tsunami," or tidal wave, of mortgage refinancings and the estimated $250 billion to $300 billion in cash they are expected to generate this year. That would be double what refinancing homeowners cashed out in 2002, propping up the economy and keeping the recession shallow.

This big cash jump doesn't come from the number of people who are refinancing, which is expected to be about the same as last year (approximately 11 million). Instead, this wave consists of older, larger mortgages with more appreciation--and, therefore, more cash to take out. Consumer behavior also plays a role. During past refinancings, homeowners "cashed in," meaning that they essentially refinanced to pay down their mortgage and boost the equity in their home.

But that's no longer the most popular option. Last year, just 14 percent of refinancing households chose to cash in, compared with the 50 percent who "cashed out," taking advantage of housing appreciation and low interest rates to increase the size of their mortgage.

Where do they spend all that money? On cars and, as Woodstock has seen, homes. Consumers typically use 25 percent of refinancing cash-outs on home improvement, according to a University of Michigan and Federal Reserve survey cited in the Credit Suisse report.

Photo: Courtesy Woodstock Building Associates

In the Money
Year Implied cash-out by households
1998 $58
1999 $60
2000 $92
2001 $150
2002 $250-$300*
(in billions) *projected
Source: Credit Suisse First Boston Report