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Housing lifts the economy

By Judy Martel · Bankrate.com
Friday, October 12, 2012
Posted: 6 am ET

Rising home sales and prices are giving an economic boost to nearly all areas of the country, according to the Federal Reserve's Beige Book, the economic barometer that's published eight times per year. It attributes growth in 10 of 12 of the Fed's regional banking markets since mid-August to an improving housing market.

Bankrate's senior financial analyst Greg McBride says there is a strong correlation between housing and the economy.  “The Great Recession was sparked by the downturn in housing, and the strength of the U.S. economy between 2004 and 2006 directly coincides with the housing boom," he notes.  "While there is no single determinant of economic growth and consumer financial well-being, it is clear that a solid housing market is a key ingredient, much the way that avoiding turnovers and penalties are important ingredients to winning football games."

McBride says the largest asset for most people is a home, so their mood about the economy is often closely tethered to the direction of home-price movements. "Even if they own very little of their home, the leverage makes it such that any increase in home value has a pronounced impact on the ratio of what they own, relative to what they’ve invested."

As the housing market continues to slowly improve, McBride says he doesn't predict another boom like the one in 2005. "But just the fact that the market has stabilized and shown signs of growth is a boost for the consumer psyche and ultimately the broader economy."

Are you seeing signs of an improving housing market and economy in your area?

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1 Comment
Larry Kilmer
October 17, 2012 at 5:38 pm

My mortgage servicer is Homeward Servicing who just took control of AHMSOI3 Servicing. Neither company wanted to complete my modifiation. My papers have been completed and in their office for over 23 months. I have completed full credit applications and submitted all their requested paperwork. They then state they need time to make a decision. After I wait the four to six week they indicate they need they then state the papers have expired and need to be completed once again/ I alspo allowed them to give me the worst advice. They indicated to me that my mortgage payments were not late enough so I needed to stop my payment for a minimum of three months. I was foolish enough to do it for one month but I caught up the next month. I have spoke with Senators Officers, Housing Counselors about five times over this time frame. I also spoke to anothee HAMP Modeifiation monitors who informed me thatr I need to just do what my mortgage company states that I must do. They is really no one or no organization or in Congress that is or can take any of this nightmare on. In the meanwhile they are all encouraging me to walk away from my house/ Why is our President allowing this? He just indicated about mortgage modifications no lonfer have to worry aboutr credit scores. This is not true as I spoke to four companies today who tell me my credit score is too low and I should work on improving first. All this stuff that is being released by our President is all just press for his re-election! For over 18 months I have not found one of his changes to improve an Americam Citizens chance of saving their home. It shocks me to thinl that there is no one or group of government that truely cares and realizes enough to pay attention to the real truth that is going on. The Press release's article after article stating what is really going on and with which servicers and no one who is really anyone willimg to follow one customers struggle to witness the actual truth. This Administration is just going to allow the average American to lose their American Dream. He is taking two dreams that most Americans should be entitled to that our President is not doing a thing about to insure us with. The first is home ownership and the second is an education. I am doing what I feel is the right thing which is to make monthly payments on a house that is under water yet this Administration is not standing behind me and do what ever is possible so that I can keep my home. It is just overwhelming with this Homeward Servicing. If anyone is stuck with them do not count on them at all. Try to refinance if you can as they refuse to help us taxpayerrs or do anything that the President statee they should follow.