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Housing and household consumption: An investigation of the wealth and collateral effects

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  • Suari-Andreu, Eduard

Abstract

The macroeconomic literature has identified a robust relationship between house prices and consumption at the aggregate level. The microeconomic literature points to three possible mechanisms behind this relationship: the wealth effect, whereby households respond to changes in housing wealth by spending/saving more; the collateral effect whereby households use the main residence as collateral for consumer loans; and the common causality effect whereby one or more variables affect both house prices and consumption simultaneously. I test the implications of these mechanisms using data from a panel survey representative of the Dutch population. For that purpose, I employ measures of subjective house prices and subjective house price expectations. Results suggest that the wealth and the collateral effects play, at best, minor roles in explaining the aggregate relationship between house prices and consumption.

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  • Suari-Andreu, Eduard, 2021. "Housing and household consumption: An investigation of the wealth and collateral effects," Journal of Housing Economics, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:jhouse:v:54:y:2021:i:c:s105113772100036x
    DOI: 10.1016/j.jhe.2021.101786
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    Cited by:

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    3. Huazhu Zheng & Jiao Qian & Guihuan Liu & Yongjiao Wu & Claudio O. Delang & Hongming He, 2023. "Housing prices and household consumption: a threshold effect model analysis in central and western China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-16, December.
    4. Stijn Dreesen & Sven Damen, 2023. "The accuracy of homeowners’ valuations in the twenty-first century," Empirical Economics, Springer, vol. 65(1), pages 513-566, July.
    5. Hao-Chen Huang & Chen-Lin Yuan & Ting-Hsiu Liao, 2022. "The Spatial Spillover Effects of Fiscal Expenditures and Household Characteristics on Household Consumption Spending: Evidence from Taiwan," Economies, MDPI, vol. 10(9), pages 1-16, September.

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    More about this item

    Keywords

    Housing; Saving; Consumption; House prices; Subjective expectations;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving

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