Greenspan Links Housing Boom, Spending

Capital gains generated by a booming housing market have probably spurred consumer spending and given a strong boost to the U.S. economy, Federal Reserve Chairman Alan Greenspan said. “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,” he told the Mortgage Bankers Assn. 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. He said even unrealized gains--money that homeowners assume they will get in the future when they sell--could influence consumer spending.