Nov 28, 2013 Philip Burgess
For much of the past five years, consumers have been reluctant to spend money in the aftermath of the financial crisis. But, multiple factors have helped improve the financial situations of Americans in recent months, including home price appreciation.
Positive momentum continued in September, with the Lender Processing Services Home Price Index revealing a 0.2 percent month-over-month bump and 9 percent year-over-year increase.
In 2014, appreciation is expected to slow to a more sustainable level and still help boost household wealth - a positive for consumers and the overall economy. According to the Zillow Home Value Index, prices are expected to rise 4.3 percent next year and breach the May 2007 peak by 2018.
"The housing market has seen a period of unsustainable, breakneck appreciation, and some cooling off is both welcome and expected," said Zillow Chief Economist Dr. Stan Humphries. "Rising mortgage rates, diminished investor demand and slowly rising inventory will all contribute to the slowdown of appreciation."
Short term lending demand could rise with stronger household wealth
With home prices on the rise and the holiday season just around the corner, consumers could spend much more than usual in the coming weeks. As a result, people could be at risk of financial troubles following the holidays.
Consumers tend to stretch their budgets during the holidays to make sure their friends and families are happy, but it is also important to consider their own financial well-being. An unexpected expense could prove detrimental after spending a lot of money of gifts. For example, if a person's car breaks down, they may struggle to pay their monthly essentials as well as the cost of the repair, potentially leading to a missed payment and late fee and penalties.
However, there is a way people can avoid these troubles - short term lending. When a consumer finds him or herself at risk, he or she can turn to a short term loan to help cover the expense. These funds are released quickly and could be used to avoid late fees. The stigma surrounding short term lending may deter people from relying on it, but consumers need to look at the whole picture. The amount charged by lenders is often less than what creditors hand out in late fees, which could make this process beneficial for many.