Rhode Island residents are spending more of their hard-earned dollars to repay debts — mortgages, tuition, credit cards and other loans — than ever before.

For every $1 that Rhode Islanders earned at the end of last year, about 14 cents went to repay debts, according to the West Chester, Pa.-based research firm Moody’s Economy.com. For a family of three with the median household income of $63,000, that debt service ate up $8,820.

In comparison, in some of the pricier areas of California, households’ debt payments climbed to nearly 25 percent of their income, according to Economy.com.

For the past few years, American consumers’ spending was fueled by borrowing made easy by rising house values, as almost anyone who owned a house could get an equity loan. But now, house values are plummeting.

Rhode Island homeowners’ average equity last year declined for three straight quarters, to $91,117, the lowest since 2001, according to Economy.com

“That’s pretty alarming,” said the company’s chief economist, Mark Zandi. “It indicates a lot of wealth has evaporated.”

The average household equity is down from about $110,000 just two years earlier, the data show. (The numbers are based on the average home equity for all households in the state, which includes everything from owners whose mortgages exceed the value of their houses to those who paid off their mortgages or bought their houses with cash.)

When house values were rising, cash-strapped owners could simply refinance — or borrow against the value of their houses by taking out a home-equity loan. But as house values have declined, so has borrowing.

The amount of cash Rhode Island homeowners extracted from their houses during the fourth quarter of last year plummeted to $1.24 billion — down from $4 billion during the same period in 2006, according to Economy.com.

A homeowner whose house has fallen in value may not be able to simply take out a home-equity loan to pay for a new roof or replace the boiler or pay off credit cards or take a vacation.

Falling house values combined with the credit crunch and the failure of wages to keep pace with inflation mean that more than ever, households are “under stress,” Zandi said. The evidence is in the rising mortgage-delinquency and foreclosure rates, both nationally and in Rhode Island, he said.

And as consumers begin to come to terms with the limits of their incomes, politicians in Washington are promoting new stimulus packages to encourage debt-strapped consumers to spend more. The reason is simple: Consumer spending makes up two-thirds of the economy.

“Consumers have been very aggressive in spending, and borrowing to finance that spending,” Zandi said. “If we do go into a recession,” he said, it will be because these higher debt loads and falling home equity lead consumers to “pull back” on their spending.

larditi@projo.com