◦ Second, through the housing wealth effect, rising home prices should help to spur consumption spending. Some evidence that home equity lending has picked up was found in Freddie Mac’s Refinance Report for the second quarter, which saw $9.5 billion in home-equity cashed-out as part of a refinance, which was up from a year ago.
◦ Finally, rising house prices will help the economic recovery by helping to spur small business formation, as a business owner’s home often serves as collateral for a start-up
“The economic recovery has completed its fourth year, but it has not been without growing pains,” says Frank Nothaft, Freddie Mac vice president and chief economist. “The U.S. has experienced the weakest economic recovery coming out of a recession in the Post-War era. Despite the eye-popping monthly house-price appreciation taking place in some parts of the country, the recovery that has lingered for years is just now starting for many Americans. Fortunately, we should see this positive housing trend continue to improve in the second half of the year. A housing recovery is a broad-based recovery, benefiting all Americans, and therefore the overall economy.”
For more information, visit www.FreddieMac.com.