Those gains are filtering down to the makers of dishwashers, refrigerators and other home appliances. Shipments of major appliances have risen for eight straight months compared with year-ago periods. Whirlpool Corp, the largest US appliance maker, said last month it expects US demand to rise 5 percent this year, up from an earlier forecast of a 2 percent increase.
Increased home buying is also stoking the renovation market.
Shelly and Michael Douglas, for example, are getting ready to plunk down US$10,000 to paint and landscape the exterior of a US$610,000 house they bought in July in Pacifica, California.
They're spending while they say they're worried about the job market. "We're concerned about it," said Shelly Douglas, a marketer for a biotechnology firm. "It would be scary if one of us lost a job."
A wealth of cash created by a refinancing boom over the last 18 months is helping to allay job anxiety. Americans refinanced about US$1 trillion in mortgage debt in 2001. That's the same amount they borrowed for new mortgages, according to Freddie Mac, the No. 2 buyer of US home loans.
The secondary-mortgage market "has facilitated the large debt-financed extraction of home equity that, in turn, has been so critical a support" for consumer spending, Greenspan said last month in New York.
Refinancing activity has yet to cool off. The Mortgage Bankers Association refinancing index earlier this month surged 14.1 percent to the highest level in two months.
That's helping consumers afford new cars and home improvements without tapping their credit cards. Total credit card debt has fallen in three of the last nine months, and in March was below its November peak.
According to a 1999 Fed survey of homeowners, the average amount of equity taken out as cash by those who refinanced in 1998 and early 1999 was US$18,240. Forty percent said they used some of the proceeds for home improvements. Another 39 percent said they used some of the money for expenditures ranging from vacations to vehicles. Repaying other debt was cited by 45 percent.
That's what Alif and Lablonda McFadden did this time around.
The Alpharetta, Georgia, couple extracted US$19,000 in cash from a home equity loan they took out in February and used it all to pay off credit-card debt they carried for five years.
Now, they're looking at buying another home as an investment property before interest rates head back up. Fed officials have indicated that sooner or later rates will have to rise to keep the economy from growing too fast. That's moving Americans like the McFaddens to consider spending more now. "Would it be feasible to start investing in real estate right now? We think so," Lablonda McFadden said. "It's better to do it now than later."
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