Housing wealth or economic climate: Why do house prices matter for well-being?
This 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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| Length: | 32 pages |
| Date of creation: | Apr 2010 |
| Date of revision: | |
| Handle: | RePEc:bri:cmpowp:10/234 |
| Contact details of provider: | Postal: Phone: 0117 33 10799 Fax: 0117 33 10705 Web page: http://www.bris.ac.uk/cmpo/Email: More information through EDIRC
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