Continuous home value appreciation could lead to increased spending, borrowing activity

After the financial crisis, millions of homeowners saw the value of their properties slashed, hurting their personal financial situations. However, values have been on the rise in the past year, potentially leading better financials for consumers. As a result, spending and borrowing activity could pick up.

With that said, short term lenders and other creditors might want to prepare for increased demand in the near future.

Home value appreciation remains above 5 percent in May
National home prices continued to rise in May, with a 0.5 percent bump from April and 5.4 percent year-over-year increase, as the Zillow Home Value Index hit $159,000. This was the second highest annual appreciation rate in the past year, and values have now jumped or remained flat for 19 consecutive months.

More than half of all metros covered by Zillow showed appreciation between April and May, with Sacramento leading the way, followed closely by Las Vegas and Los Angeles. Meanwhile, 29 of 30 metros experience annual appreciation, led by Las Vegas, Sacramento and San Francisco.

Home value gains are expected to slow to a more sustainable level in the next year, with appreciation falling to 4.1 percent during the 12 month period ending May 2014.

"Enjoy it while it lasts, because the housing market will undoubtedly look very different a few years down the road from how it appears now," said Zillow chief economist Stan Humphries. "Inventory constraints are beginning to ease in many areas as more listings and new homes come on line, which will ultimately help end this period of rapid annual home value appreciation above 5 percent."

Even with appreciation dipping slightly, homeowners will still receive a boost to their finances.

Affordable mortgage rates have been driving values higher
One of the main reasons home values have been increasing has been the fact that mortgage rates that have been historically low. With affordable financing available, more prospective buyers are jumping into the market, leading to multiple bidders on properties and higher selling prices.

Demand could pick up even further in the coming months, as rates experienced the first decline in six weeks in mid-June.

Both 15- and 30-year fixed-rate mortgages saw averages fall during the week ending on June 20 for the first time in nearly a month and a half, according to Freddie Mac's latest Primary Mortgage Market Survey.

Freddie Mac vice president and chief economist Frank Nothaft said rates dipped as markets awaited the Federal Reserve's monetary policy announcement.

"The Fed stated that economic growth has been expanding at a moderate pace and that labor market conditions have shown further improvement, although the unemployment rate remains elevated," Nothaft said. "It noted inflation has been running below the Fed's longer-run objective as well."

As long as higher home values lead to improved finances for homeowners in the United States, spending and borrowing activity is likely to rise. As a result, short term lending demand may rise, so these financial institutions should prepare staffers to handle an influx of applications.