Housing wealth or economic climate: Why do house prices matter for well-being?
AbstractThis study investigates whether and why house prices matter for well-being. House prices may influence well-being via a wealth/access-to-credit mechanism, as a rise in prices increases housing wealth and the collateral value of a house, and via a relative concerns mechanism, if renters compare themselves to homeowners and vice versa. Alternatively, any correlation between house prices and well-being may simply reflect broader economic conditions rather than a causal effect. Using local area house price data, this study distinguishes between these alternative explanations by comparing the correlation between local house prices and well-being for homeowners and renters. A small positive correlation between house prices and well-being exists for both homeowners and renters, indicating the absence of a wealth/credit mechanism or relative concerns mechanism. This correlation cannot be explained by economic variables such as local unemployment, earnings or earnings expectations, hinting at a purely psychological phenomenon.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 10/234.
Length: 32 pages
Date of creation: Apr 2010
Date of revision:
Well-being; House prices; Wealth; Economic climate;
Find related papers by JEL classification:
- I1 - Health, Education, and Welfare - - Health
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-HAP-2010-04-24 (Economics of Happiness)
- NEP-NEU-2010-04-24 (Neuroeconomics)
- NEP-URE-2010-04-24 (Urban & Real Estate Economics)
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