The value of Americans' real-estate holdings jumped about $400 billion, or 2.1%, to $19.1 trillion, in the second quarter, the Federal Reserve said Thursday, the highest level since the final three months of 2008. The increase follows a similar leap in the first quarter and raises the amount of equity that owners have in their homes to a high since the third quarter of 2008.
Since the recession, sliding property prices have made Americans feel less wealthy and less willing to spend on everything from home renovations and appliances to restaurant meals. That weighs on the recovery, because consumer spending fuels two-thirds of the nation's economic activity. With real-estate values now rising—and housing chalking up more gains recently in sales and construction—Americans are seeing their critical assets rise in value as their disposable incomes also climb. That helps in rebuilding wealth and makes even heavier debts more manageable.
Rising home values are "very helpful," said Harm Bandholz, chief U.S. economist at UniCredit Bank, who estimates that stabilizing home prices could boost America's gross domestic product in 2012 by more than half a percentage point. "I think the fundamentals for a stronger pickup in consumer spending are in place."
U.S. households' net worth—the value of homes, stocks and other investments minus debts and other liabilities—dropped about $300 billion, or 0.5%, to $62.67 trillion from April through June, the first decline in three quarters. But the drop was driven by financial assets like stocks, which lost around $600 billion in value as the Dow Jones Industrial Average sank 2.5% in the second quarter. During the third quarter, such investments have rebounded.
The Fed report also showed that borrowing inched up, with household liabilities, mostly debt, rising 0.1% to $13.46 trillion.
The salutary effect of housing-market gains on Americans' balance sheets could reduce the risk of recession, some economists said. Home prices rose 6.9% in the second quarter from three months earlier, according to CoreLogic Inc. Last week, the data firm said that in the first half of 2012, rising prices lifted more than 1.3 million homeowners who owed more on their homes than they were worth above the water line. The Federal Reserve's program of buying $40 billion in mortgage-backed securities a month, announced last week, could further boost housing by keeping interest rates on mortgages low.
"The ongoing climb by home prices can only enhance the economic outlook," Moody's Analytics economist John Lonski wrote.This "will help household expenditures grow by enough to contain recession risks."
Onno Koelman, a 32-year-old engineer, is among those feeling better about his personal finances and spending more. Mr. Koelman and his wife bought a $525,000 home in Northern California's Marin County in the spring of 2010 and are refinancing their mortgage for the second time. Recent appraisals put their house between $550,000 and $560,000.
"It's definitely relaxing," said Mr. Koelman, who works for a firm that serves the drinking-water industry. With their residence gaining value, the couple is spending money on home improvements rather than paying off hefty student debts. "Things are going to get better," Mr. Koelman said.
—Nick Timiraos contributed to this article.