Salient to Investors:

Net worth for households and non-profit groups in Q4 2012 increased to the highest level since Q4 2007 on a recovery in home values – $66.1 trillion versus $67.4 trillion in Q3 2007.

Paul Edelstein at IHS Global Insight said households have acquired a lot of financial assets, a positive for spending.

CoreLogic says the national median single-family home price climbed 10 percent in Q4 2012, the biggest gain since 2005, rising in 88 percent of US cities.

Karl Case, John Quigley and Robert Shiller found that changes in house prices and real estate wealth have a bigger impact on consumer spending than the ups and downs of stock prices and financial wealth. Case said in February that consumer spending will increase $80 billion in 2013 from the rise in home values.

Fed Vice Chairman Janet Yellen said even if the interest rate channel is less powerful right now than it was before the crisis, asset purchases still work to support economic growth through other channels, including by boosting stock prices and house values.

Owners’ equity as a share of total household real-estate holdings increased to 46.6 percent in Q4 2012. Household debt increased at a 2.4 percent annual rate in Q4 2012, the biggest advance in almost five years. Other forms of consumer credit, including auto and student loans, climbed at a 6.6 percent pace, the most in 5 years. Mortgage and consumer-loan payments in Q3 2012 was the smallest share of after-tax income since 1983, while the debt-service ratio was 10.6 percent of disposable income versus the peaked of 14.1 percent in 2007.

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