A reviving real estate market added to gross domestic product last year for the first time since 2005, according to the Bureau of Economic Analysis in Washington. 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 Policy
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.
At the end of 2012, the average rate for a 30-year fixed primary mortgage fell to an all-time low of 3.3 percent, according to home-loan financier Freddie Mac in McLean, Virginia. 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.”