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Mortgage News |
Greenspan: Household balance sheets generally in `good shape' WASHINGTON (AP) -- The balance sheets of American households are generally in "good shape" as extra cash from a huge wave of home mortgage refinancing and decades-low interest rates helped consumers better manage their debt, Federal Reserve Chairman Alan Greenspan said Monday The financial health of consumers is important to the economy, which in the second half of last year finally cast off its lethargy and has been growing at a healthy pace. Consumer spending accounts for roughly two-thirds of all economic activity in the United States. Greenspan, in a speech to a credit union conference meeting here, pointed out that U.S. households own more than $14 trillion in real estate assets -- almost twice the amount they own in mutual funds and directly hold in stocks. Home mortgage refinancings and a solid rise in home values helped to bolster consumer spending during economic hard times as well as during the recovery, Greenspan said. "Over the past two years, significant increases in the value of real estate assets have, for some households, mitigated stock market losses and supported consumption," Greenspan said in his prepared remarks. Greenspan, in his remarks, did not discuss the future direction of short-term interest rates in the United States or the state of the U.S. economy. Two gauges the Fed likes to use to assess the extent of American household indebtedness and to get a view of the financial health of the overall sector "rose modestly over the 1990s," Greenspan said. "During the past two years, however, both ratios have been essentially flat." The debt-service ratio measures the share of income devoted by households for paying interest and principal on their debt. When the debt service ratio is high, households have less money available to buy goods or services, the Fed chief explained. The Fed's second measure, called the general financial obligations ratio, incorporates households' other recurring expenses, such as rents, auto leases, homeowners' insurance and property taxes, he said. "Overall, the household sector seems to be in good shape and much of the apparent increase in the household sector's debt ratios over the past decade reflects factors that do not suggest increasing household financial stress," Greenspan said. "And, in fact, during the past two years, debt service ratios have been stable," he added. Treasury Secretary John Snow, in remarks to the same gathering, called on credit union representatives to help Americans -- especially young people and immigrants -- become financially savvy. "I think we have a tremendous opportunity to start fresh with a new generation to ensure that tomorrow's young adults understand how important it is to save and how to protect themselves from identity theft in the same way that they understand the basics of physical health or road safety," Snow said. Continue with:US Treasury's Snow--data point to robust growthAnalysts lift GDP,cut jobs forecasts--Fed surveyTreasurys Edge Higher as Dollar WeakensJan. CPI Rises 0.5% On Energy's Surge, But Inflation MutedDollar Hits Three-Month High Vs. YenTeam Bush's Tin Ear on JobsHidden defense costs add up to double troubleJapan's Exports Rise for a Third Month; Trade Surplus Near Four-Year HighFannie, Freddie Overestimated Loan LimitsWith house their only asset, time to sell?Shortages leading to rapid steel price hikesHispanic unemployment rate going upCitigroup to buy S.Korea's Koram Bank for $2.7BHome Mortgage Choices Tips on the Best Home LoansU.S. growth forecasts upgradedGold ticks higher as dollar dipsA barrel of trouble?Bonds rise as dollar dipsEducation may not be the answerTHE ECONOMY: SEVEN INDICATORS
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