Americans are feeling wealthier, which could cause them to spend some serious money on homes.

Salaries and wages are going up, according to a new report by the Bureau of Economic Analysis. That's a division of the U.S. Department of Commerce that tracks personal income, among other indicators. And right now the outlook is positive. Personal income increased by nearly $53 billion or half a percent in June, along with equally strong growth in personal disposable income.

In fact, Americans can't get spend their money fast enough. Although some mortgage activity has slowed due to a slight uptick in interest rates, homeowners who are refinancing are taking cash out of their homes. Three-quarters of homeowners refinancing a $100,000 loan increased their loan amount to $105,000, says the Mortgage Bankers Association.

Once upon a time, homeowners refinanced to take advantage of lower interest rates. Not so today. They refinance to improve cash flow or to buy big ticket items. Luckily for the housing industry, they are putting a lot of their money into homes.

According to the Harvard's Joint Center for Housing Studies, Americans paid $133 billion for home improvements in the 12 months ending June 30.

Others have been tempted by GM and Ford's "employee" deals which enable car buyers to buy cars at the discounts that employees pay, and they are also paying off credit card debt which has also crept up lately. And some are using their equity to buy second and third homes. The average second home buyer is a baby boomer who makes around $77,000 annually.

Americans aren't saving their money either. Personal savings fell to zero percent in June -- the second lowest savings rate since the Great Depression nearly 75 years ago. The reason? The housing wealth effect. Homeowners since 1999 have watched their home values grow by more than two-thirds, giving the average household a net worth of $400,000, according to the Federal Reserve.

But not everyone is feeling flush. Some consumers are feeling the pinch of a slightly higher core inflation, up 1.9 percent over the last 12 months. Also job cuts have been announced by some of the Dow's most famous large employers, causing some economists to anticipate that we might be facing the largest layoffs since the 2001 recession. It's not surprising, then, that the government revised its annual growth rate from 2002 to 2004 more than a quarter point. The Fed also revised its inflation rate, noting that it was a little hotter than previously stated.

That means we are still in the weakest economic recovery since post-World War II. The good news is the economy is growing, people with jobs are getting raises, interest rates are still at 30-year lows, and housing is still providing double-digit gains on a national basis.

The National Association of Realtors' latest figures on pending housing sales suggest that housing continues to be the nation's favorite place to put their money. Based on data collected for June, the Pending Home Sales Index rose over half a percent, more than three and a half percent higher than June 2004.

Keep in mind that it takes a lot of houses to move an index even the smallest fraction.

Published: August 4, 2005

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.