Property wealth, which grew at the fastest rate in 20 years, has raised hopes for a rebound in the West’s economy
Property wealth in Colorado – such as home values, equity in real estate, retirement accounts and businesses in the stock market – surged by $78,000 (€68,000) on average for the past year.
That’s the highest annual gain for homes, buildings and equipment of any state in the US from January to November of last year, according to a report from the S&P Dow Jones Indices.
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Homeowners’ gains have surged thanks to low mortgage rates, low rents and the new US economy, which is boosting the value of investments such as stocks.
In the last three months of 2017, Colorado homeowners were worth 10.7% more than they were three months earlier.
Lawrence Yun, chief economist at the National Association of Realtors, said many people own homes out of necessity, using home equity to pay for a car, for children’s education, for medical costs and so on.
The report also noted that car loans were up 5.7% from a year earlier and record household debt in many cases, including credit card balances.
However, the rapid rises in house and business equity don’t necessarily mean the economy will get stronger as it enters its second year of recovery. Property and consumer wealth didn’t cause the slowdown during the last recession – homeowners chose to refinance their debts to obtain more favorable terms or gave up the house.
There’s also the risk that housing and the stock market will get out of control, which is likely to create a housing bubble.
“Some of these assets are prices that have risen as a result of interest rate reductions or low interest rates, while many are from people investing and using it to help improve their situation and thrive,” said Donald Boyd, director of research at the Colorado Division of Housing.