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Home Value Highest Since ‘07

by LiveModern Webmaster last modified Apr 17, 2013 01:05 AM
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by Administrator last modified Apr 15, 2013

More American homeowners will be able to use their properties as cash machines again after real estate equity jumped last year by the most in 65 years. Property owners recaptured $1.6 trillion as home values climbed to the highest levels since 2007. The amount by which the value of the houses [...]




 

 

More American homeowners will be able to use their properties as cash machines again after real estate equity jumped last year by the most in 65 years. Property owners recaptured $1.6 trillion as home values climbed to the highest levels since 2007. The amount by which the value of the houses exceeds their underlying mortgages rose to $8.2 trillion last year, a gain of 25 percent, according to Federal Reserve data.

“Lenders are starting to come back into the marketplace,” “We’re not going back to the wild, Wild West we saw during the real estate boom, but we are going to see more people spending their equity.” Americans went on a spending spree in the five years before the 2006 peak of the real estate market, tapping about $800 billion of their rising equity to spend on everything from cars and televisions to debt consolidation and college tuition.

Value Evaporated: About $6.5 trillion of residential real estate value evaporated after a wave of mortgage defaults sparked the 2008 financial crisis. The median U.S. home price hit bottom in 2012 after a 33 percent drop, as measured by the National Association of Realtors. In February, the median price was up 12 percent from a year earlier, the trade group said last week.

Reviving Market : A reviving real estate market added to gross domestic product last year for the first time since 2005and the economy probably will grow at a 1.9 percent pace in 2013, the fourth year after the end of the recession, according to the median forecast of 83 economists surveyed by Bloomberg.

Still, not everyone is spending. The amount households have in bank deposits, savings bonds, fixed-income mutual-funds and municipal securities increased $500 billion last year, equaling the most since 2007, according to FTN Financial, based on Fed data, while net household debt increased $10 billion, the least since 2005. “You might qualify for a home equity loan, but still have concerns about the economy or job security said Icon Advisory’s Richardson. “Or, you might be in that large group of people who need prices to come back a lot more before they qualify.”

Fed Buying: Fed policy makers for four years have driven down fixed home-loan rates by purchasing mortgage-backed bonds to stimulate demand. Last week, the central bank said it would continue to buy securities at a pace of $85 billion a month in their third round of so-called quantitative easing. Falling rates helped to boost home sales to 4.7 million last year, a gain of 8.4 percent from 2011. “When we see some more history of home-price stability and improving employment data, there will be more people thinking about using their equity,” said Focardi, of CEB TowerGroup. “Having equity gives a boost to confidence.”

By Kathleen M. Howley


 

 

 
 
 

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