U.S. Housing Market Growth is Boosting the Economy

A recent study conducted by the Federal Reserve shows that improvement in the housing market is helping to better the economy. From mid-August through September, an increase in home prices also lead to an increase in economic growth in 10 out of 12 of the Federal Reserve’s regional banking districts.

In order to keep the housing market strong, the Federal Reserve is buying mortgage bonds that will lower long-term mortgage rates. As mortgage rates continue to increase, more potential homebuyers will be willing to borrow and spend. The Fed also wants to keep short-term interest rates at rock bottom levels until mid-2015 in order to speed up the recovery process.

Once borrowing becomes cheaper, a housing recovery can begin. And, along with the housing recovery, consumer spending will also increase. Consumer spending drives nearly 70 percent of all economic growth, so a housing recovery is essential in order for the economy to make a comeback.

For every 5 percent increase in home prices, more than 2 million homeowners will no longer be “underwater on their mortgage.” Therefore, it is crucial that home prices increase in order to speed up recovery.