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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1436)	3/8/1999 8:15:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Greenspan Says Housing Boom May Fuel Spending By Andrew Clark WASHINGTON (Reuters) - Capital gains generated by a booming housing market have likely spurred consumer spending and given a strong boost to the U.S. economy, Federal Reserve Chairman Alan Greenspan said Monday. ''We estimate ... that each home sale since 1995 has averaged roughly $35,000 in capital gains, implying a total of $150 billion annually for the economy as a whole,'' he told the Mortgage Bankers Association. In addition to home sales, a wave of refinancings induced by low mortgage rates has also helped put more spending money in consumers' pockets. ''One might expect that a significant portion of the unencumbered cash received by sellers and refinancers was used to purchase goods and services,'' Greenspan said. Departing from the prepared text of his speech, the Fed chief said this effect could be felt for some time. ''Even though new home sales ... may actually flatten out, there's just no question that the existing home sales trend will continue higher -- that capital gains, the unrealized gains, will continue,'' he said. ''And as the sales are turned over, you invariably get significant changes in realized capital gains which almost surely will have effects on consumer purchases and on the economy.'' He said even unrealized gains -- money that homeowners' assume they will get in the future when they sell -- could influence consumer spending. ''People who own a home likely have a sense of the appreciation in its value over the years. These unrealized gains may be factored into their long-term planning, and thus may influence spending on goods and services both well before and after the home is sold.'' Greenspan said inflation remained low -- despite a tight labor market and the U.S. economy's ''spectacular performance'' in recent years -- helping to keep mortgage rates down. ''That, together with the robust job market and healthy gains in income and lofty wealth positions, have propelled the demand for housing to extraordinary levels and with it the demand for new mortgages,'' he said. ''Two-thirds of American households now own their homes, up sharply from just a few years ago.'' Greenspan noted mortgage refinancings had fallen off this year as long-term mortgage rates had crept up, and suggested the market for refinancings might be nearly exhausted. ''Given last year's prolonged period of low mortgage rates, one wonders whether many of those who have not yet refinanced will do so, even if mortgage rates remain at their current levels,'' he said.