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The Impact of the Housing Market Boom and Bust on Consumption Spending


  • Jeremy A Leonard


While econometric evidence for the United States has consistently shown that increases in real estate wealth induce additional consumption, it does not directly speak to the effect of a substantial decrease in real estate wealth. This paper examines the real-estate wealth-consumption relationship over the past half century with a particular focus on the sharp decline in 2006–08, and finds that the wealth effect in the recent down market is significantly larger than in an up market. Additionally, wealth changes seem only to affect consumption of services and nondurable goods; there is virtually no impact on durable-goods consumption.

Suggested Citation

  • Jeremy A Leonard, 2010. "The Impact of the Housing Market Boom and Bust on Consumption Spending," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 45(2), pages 83-93, April.
  • Handle: RePEc:pal:buseco:v:45:y:2010:i:2:p:83-93

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    References listed on IDEAS

    1. Timothy J. Bartik, "undated". "Who Benefits from Local Job Growth: Migrants or Original Residents?," Upjohn Working Papers and Journal Articles tjb1993rs, W.E. Upjohn Institute for Employment Research.
    2. Kim S. So & Peter F. Orazem & Daniel M. Otto, 2001. "The Effects of Housing Prices, Wages, and Commuting Time on Joint Residential and Job Location Choices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1036-1048.
    3. Mitch Renkow, 2003. "Employment Growth, Worker Mobility, and Rural Economic Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 503-513.
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    Cited by:

    1. Beatrice D. Simo-Kengne & Stephen M. Miller & Rangan Gupta & Goodness C. Aye, 2013. "Time-Varying Effects of Housing and Stock Prices on U.S. Consumption," Working Papers 201325, University of Pretoria, Department of Economics.
    2. Caporale, Guglielmo Maria & Costantini, Mauro & Paradiso, Antonio, 2013. "Re-examining the decline in the US saving rate: The impact of mortgage equity withdrawal," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 215-225.
    3. Paradiso, Antonio & Casadio, Paolo & Rao, B. Bhaskara, 2012. "US inflation and consumption: A long-term perspective with a level shift," Economic Modelling, Elsevier, vol. 29(5), pages 1837-1849.
    4. Chad R. Wilkerson & Megan D. Williams, 2011. "Booms and busts in household wealth: implications for Tenth District states," Economic Review, Federal Reserve Bank of Kansas City, issue Q II.
    5. Beatrice Simo-Kengne & Stephen Miller & Rangan Gupta & Goodness Aye, 2015. "Time-Varying Effects of Housing and Stock Returns on U.S. Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 50(3), pages 339-354, April.

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