Freddie: Home Equity Growth Drove Spending

Growth in home equity wealth has driven consumption spending among Americans over the past few years, Freddie Mac's chief economist told an audience of mortgage originators, real estate professionals, and financial planners Sept. 23.Frank Nothaft said most economists expected a retrenchment in consumption spending in the past couple of years, but that it didn't happen because of home equity wealth, which is the value of housing minus the outstanding single-family mortgage debt. Home equity wealth now stands at $7.7 trillion, an increase of $2 trillion over the past two years, Mr. Nothaft said at a Woodbury, N.Y., meeting sponsored by Mortgage Warehouse, a retail lender based in Melville, N.Y., and its affiliate Vertical Lend. Families, he said, regard home equity wealth gains as "more permanent" than wealth gained through stock market investments. Therefore, people were more willing to put these gains back into the economy, Mr. Nothaft said.