Property-rich Americans spending more

[BOSTON] Americans flush with cash as they regain equity in their homes are spending more after years of pinching pennies.

The share of owners whose homes are worth at least 50 per cent more than they owe on their mortgages rose to 18 per cent in the fourth quarter as property prices gained, up from 16 per cent in the prior three months, according to a report last week by RealtyTrac, an Irvine, California-based real estate data firm. US homeowners held US$9.7 trillion of equity in the third quarter, a 4.5 per cent gain from the earlier period, according to the Federal Reserve.

Rising home values are boosting the economy by giving owners more confidence to buy appliances, electronics and cars, said RealtyTrac vice-president Daren Blomquist. Every US$1 gain in home equity adds as much as three cents to personal spending that accounts for about 70 per cent of the economy, said Mark Zandi, chief economist with Moody's Analytics in West Chester, Pennsylvania. Using that formula, equity gains in the third quarter will spur more than US$12.5 billion of consumer outlays.