Strong home value appreciation continues to fuel household wealth

Consumers are the driving force behind the borrowing market, and when household wealth ticks up, spending usually follows suit, which, in turn, can lead to more lending activity.

With strong home price appreciation continuing in July, American homeowners are likely experiencing heightened levels of household wealth. For this reason, it would be wise for financial institutions, such as short term lenders, to prepare for an influx of new loan applications.

Home prices surge in July
There was no slowing home price appreciation in July, as the CoreLogic Home Price Index (HPI) report revealed a 12.4 percent year-over-year increase - the 17th consecutive month of annual gains. When compared to June, values were up 1.8 percent.

August is expected to be a strong month as well, with the firm's Pending HPI projecting a 12.3 percent annual improvement and a 0.4 percent monthly bump.

"Home prices continue to climb across the nation in July with markets hit hardest during the downturn leading the way," said Anand Nallathambi, president and CEO of CoreLogic. "Nationally, home prices are now within 18 percent of their peak levels reached in April of 2006."

Appreciation is expected to slow a bit to close out the year, but it should remain strong enough to continue to boost household wealth, which could keep borrowing activity elevated for the remainder of 2013.

"Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand," said Dr. Mark Fleming, chief economist for CoreLogic.

The state that showed the strongest improvement was Nevada at 27 percent, followed by California, Arizona, Wyoming and Oregon. Meanwhile, Delaware was the only state to post depreciation, with prices dropping 1.3 percent.

Spending improved at U.S. retailers in July
One sign that surging home prices helped increase consumer spending was the bump in retail sales seen during July. According to the U.S. Department of Commerce, sales at retailers reached $424.5 billion, a 0.2 percent bump from June and 5.4 percent year-over-year jump.

"We're seeing sales pick up in multiple categories - that's a promising sign that consumer spending might be a little bit stronger in the third quarter," Michael Brown, economist with Wells Fargo Securities LLC, told Bloomberg. "We've seen wage and salary growth continue to expand with the pace of employment. That's helped support some additional consumer activity."

Short term lending could prove beneficial to consumers who increase spending
Whenever Americans increase spending, they are taking on the financial risk of an unexpected expense arising that forces them to fall short of monthly essentials. Fortunately, there are ways to survive such money disasters, including obtaining a short term loan.

For whatever reason, consumers who find themselves unable to pay for a car repair or trip to the hospital because they recently increased spending can take advantage of short term lending. Borrowers can obtain a loan for a short period of time, which comes with interest that is often less than what would have been incurred through late fees and penalties on missed payments.