Real estate values increased $554 billion in the third quarter in the wake of higher home prices driven by limited inventory and strong demand, according to the latest figures from the Federal Reserve.
The figures also show that household wealth, which includes checking and savings minus mortgages and other debt, jumped 1.8% to $90.2 trillion for the period, the Associated Press reported.
- Household debt rose at an annual rate of 4% in the third quarter from 4.3% in the second quarter, while mortgage borrowing moved up 2.9% during the period and other forms of consumer credit, including student loans, increased 7.5%, according to Investor’s Business Daily.
The rise in real estate values comes as tight inventory triggers severe housing shortages in many areas of the country, pushing prices up. But there are some questions hanging over the market in light of a widely expected move by the Fed to increase its benchmark interest rates by the year-end, which could be a drag on any potential growth.
The latest figures by the Fed back up recently released data from the CoreLogic Home Price Index showing U.S. home prices increased 1.1% from September to October and were up 6.7% from the year-earlier period.
Forecasts suggest that elevated home values will continue into 2017, while higher home prices could boost sales as more homeowners are enticed to sell their properties.
Those increases should taper somewhat, however. CoreLogic said it expects home prices to increase 4.6% from October 2016 to October 2017, down from the 5.2% year-over-year gains forecast in September.
Although the ongoing rise in prices is welcomed by some parts of the construction industry, elevated pricing is not necessarily good news for younger, first-time buyers as they are already struggling to save enough cash for a down payment.
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