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Is Housing Wealth an 'ATM'? The Relationship Between Household Wealth, Home Equity Withdrawal, and Saving Rates

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Author Info
Vladimir Klyuev
Paul S. Mills

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Abstract

This paper examines the role increasing personal wealth and home equity withdrawal (HEW) have had in the decline in the personal saving rate in the United States. It does so by comparing the U.S. experience with those of Australia, Canada, and the United Kingdom. Mortgage market liberalization and innovation should reduce household cash flow and collateral constraints while making housing wealth more liquid as HEW becomes easier over time. Regression analysis indicates the expected negative relationship between U.S. saving and net worth, with a somewhat smaller coefficient than in previous studies. HEW is estimated to have a temporary negative impact on saving of the order of 20 cents on the dollar.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/162.

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Length: 27 pages
Date of creation: 12 Jul 2006
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Handle: RePEc:imf:imfwpa:06/162

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Keywords: Housing saving ; home equity withdrawal ; housing finance ; Savings ; United States ; Loans ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gali, Jordi, 1990. "Finite horizons, life-cycle savings, and time-series evidence on consumption," Journal of Monetary Economics, Elsevier, vol. 26(3), pages 433-452, December. [Downloadable!] (restricted)
  2. Pietro Catte & Nathalie Girouard & Robert Price & Christophe André, 2004. "Housing Markets, Wealth and the Business Cycle," OECD Economics Department Working Papers 394, OECD, Economics Department. [Downloadable!]
  3. Glenn Canner & Karen Dynan & Wayne Passmore, 2002. "Mortgage refinancing in 2001 and early 2002," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 469-481. [Downloadable!]
  4. Alan Greenspan & James Kennedy, 2005. "Estimates of home mortgage originations, repayments, and debt on one-to-four-family residences," Finance and Economics Discussion Series 2005-41, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  5. Laurence Boone & Nathalie Girouard & Isabelle Wanner, 2001. "Financial Market Liberalisation, Wealth and Consumption," OECD Economics Department Working Papers 308, OECD, Economics Department. [Downloadable!]
  6. Margaret M. McConnell & Richard W. Peach & Alex Al-Haschimi, 2003. "After the refinancing boom: will consumers scale back their spending?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Dec. [Downloadable!]
  7. Allen Frankel, 2006. "Prime or not so prime? An exploration of US housing finance in the new century," BIS Quarterly Review, Bank for International Settlements, March. [Downloadable!]
  8. Bennett, Paul & Peach, Richard & Peristiani, Stavros, 2001. "Structural Change in the Mortgage Market and the Propensity to Refinance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 955-75, November.
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  9. John Krainer & Milton Marquis, 2003. "Mortgage refinancing," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Oct 3. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul S. Mills & John Kiff, 2007. "Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets," IMF Working Papers 07/188, International Monetary Fund. [Downloadable!]
  2. Vladimir Klyuev, 2008. "Show Me the Money: Access to Finance for Small Borrowers in Canada," IMF Working Papers 08/22, International Monetary Fund. [Downloadable!]
  3. Hugo Benítez-Silva & Selcuk Eren & Frank Heiland & Sergi Jiménez-Martín, 2008. "How Well do Individuals Predict the Selling Prices of their Homes?," Economics Working Papers 1065, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2008. [Downloadable!]
    Other versions:
  4. Buiter, Willem H, 2008. "Housing Wealth isn't Wealth," CEPR Discussion Papers 6920, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Frederic S. Mishkin, 2007. "Housing and the monetary transmission mechanism," Proceedings, Federal Reserve Bank of Kansas City, pages 359-413. [Downloadable!]
    Other versions:
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