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Housing Activity and Consumer Spending

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  • Jonathan McCarthy
  • Charles Steindel

Abstract

The current expansion has seen record-high levels of transactions in housing, extraordinary growth in the aggregate value of owner-occupied housing, and large increases in the amount of funds realized from the refinancing of mortgage debt. Many analysts thus have pointed to the strong housing market and rising home prices as a major pillar supporting recent economic growth and have expressed concern that a contraction in housing activity and values could pose a significant risk to consumer spending and real economic growth. This paper explores the channels by which the housing market may affect consumer spending and assesses the potential risk from a softening in the housing market. Our assessment is that while a housing slowdown by itself may slow consumer spending some, it is probably insufficient to precipitate a downturn without some additional shocks outside of the sector.Business Economics (2007) 42, 6–21; doi:10.2145/20070201

Suggested Citation

  • Jonathan McCarthy & Charles Steindel, 2007. "Housing Activity and Consumer Spending," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(2), pages 6-21, April.
  • Handle: RePEc:pal:buseco:v:42:y:2007:i:2:p:6-21
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    Cited by:

    1. Zohrabyan, Tatevik & Leatham, David J. & Bessler, David A., 2008. "Cointegration Analysis of Regional House Prices in U.S," 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48138, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    2. LaVaughn M. Henry, 2017. "Are Young People Becoming More Risk Averse? An Analysis of Factors Contributing to the Rise in Precautionary Savings Among Young Adults," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(1), pages 32-40, January.

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