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Why do Households Concentrate Their Wealth in Housing?

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Author Info

  • John D. Benjamin

    ()
    (Department of Finance and Real Estate, Kogod School of Business, American University, 4400 Massachusetts Avenue, NW Washington, DC 20016)

  • Peter Chinloy

    ()
    (Department of Finance and Real Estate, Kogod School of Business, American University, 4400 Massachusetts Avenue, NW Washington, DC 20016)

  • G. Donald Jud

    ()
    (Department of Finance, School of Business, University of North Carolina, Greensboro, North Carolina 27412)

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    Abstract

    An apparent paradox in household wealth accumulation in the United States is the relatively small holding of financial assets and the large holding of housing wealth. To explain the high concentration of household wealth in housing, this paper estimates the marginal propensity to consume from housing and from financial assets. A higher marginal propensity to consume from housing rather than from financial assets would lead households to concentrate their wealth in real estate. For aggregate U.S. quarterly data from 1952:1 to 2002:2, the marginal propensity to consume from housing is higher than that from financial wealth. These conditions provide a rationale for the concentration of household assets in housing.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol26n04/01.329_344.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 26 (2004)
    Issue (Month): 4 ()
    Pages: 329-344

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    Handle: RePEc:jre:issued:v:26:n:4:2004:p:329-344

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    Cited by:
    1. Oikarinen, Elias, 2006. "Price Linkages between Stock, Bond and Housing Markets - Evidence from Finnish Data," Discussion Papers 1004, The Research Institute of the Finnish Economy.
    2. Michael LaCour-Little & Eric Rosenblatt & Vincent Yao, 2010. "Home Equity Extraction by Homeowners: 2000-2006," Journal of Real Estate Research, American Real Estate Society, vol. 32(1), pages 23-46.
    3. Oikarinen, Elias, 2005. "The Diffusion of Housing Price Movements from Centre to Surrounding Areas," Discussion Papers 979, The Research Institute of the Finnish Economy.
    4. Tsangyao Chang & Xiao-lin Li & Stephen M. Miller & Mehmet Balcilar & Rangan Gupta, 2013. "The Co-Movement and Causality between the U.S. Real Estate and Stock Markets in the Time and Frequency Domains," Working papers 2013-34, University of Connecticut, Department of Economics.
    5. Oikarinen, Elias, 2005. "Is Housing Overvalued in the Helsinki Metropolitan Area?," Discussion Papers 992, The Research Institute of the Finnish Economy.
    6. Steven Bourassa & Donald Haurin & Jessica Haurin & Martin Hoesli & Jian Sun, 2007. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Working Papers 07-03, Ohio State University, Department of Economics.
    7. Victor Chernozhukov & Roberto Rigobon & Thomas M. Stoker, 2010. "Set identification and sensitivity analysis with Tobin regressors," Quantitative Economics, Econometric Society, vol. 1(2), pages 255-277, November.
    8. Souphala Chomsisengphet & Anthony Pennington-Cross, 2006. "Subprime refinancing: equity extraction and mortgage termination," Working Papers 2006-023, Federal Reserve Bank of St. Louis.
    9. William Hardin & Sheng Guo, 2012. "Wealth, Composition, Housing, Income, and Consumption," Working Papers 1201, Florida International University, Department of Economics.
    10. Su, Chi-Wei, 2011. "Non-linear causality between the stock and real estate markets of Western European countries: Evidence from rank tests," Economic Modelling, Elsevier, vol. 28(3), pages 845-851, May.
    11. Victor Chernozhukov & Roberto Rigobon & Thomas Stoker, 2009. "Set identification with Tobin regressors," CeMMAP working papers CWP12/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    12. Dettling, Lisa J. & Kearney, Melissa S., 2014. "House prices and birth rates: The impact of the real estate market on the decision to have a baby," Journal of Public Economics, Elsevier, vol. 110(C), pages 82-100.
    13. Su Han Chan & Ko Wang & Jing Yang, 2003. "Pricing Factors in Real Estate Markets: A Simple Preference Based Approach," International Real Estate Review, Asian Real Estate Society, vol. 6(1), pages 102-120.
    14. Diego A. Salzman & Remco C.J. Zwinkels, 2013. "Behavioural Real Estate," Tinbergen Institute Discussion Papers 13-088/IV/DSF57, Tinbergen Institute.
    15. Lisa J. Dettling & Melissa Schettini Kearney, 2011. "House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby," NBER Working Papers 17485, National Bureau of Economic Research, Inc.

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