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Analysis of Consumers' Perceptions of Buying Conditions for Houses

  • Pami Dua

    (Delhi School of Economics
    Economic Cycle Research Institute, New York, U.S.A.)

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This paper examines the determinants of consumers' buying attitudes for houses. Data on buying attitudes are from responses to the Surveys of Consumer Attitudes conducted by the Survey Research Center, University of Michigan. The determinants considered include current and expected interest rates, current and expected real disposable income and house prices. The empirical estimates show that a long-run relationship exists between buying attitudes for houses and each of the above variables. Each of these determinants also Granger cause buying perceptions. Generalized impulse responses show that shocks to each of the above variables have a predictable and permanent impact on buying attitudes. Furthermore, generalized variance decompositions suggest that both current and expected interest rates explain a large proportion of the variation in consumers’ perceptions towards buying houses. Since consumers' attitudes towards buying houses are likely to be translated into actual purchases, this study shows that in order of importance, interest rates - both current and future - have the maximum impact on decisions to purchase houses followed by expectations of real disposable income.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 127.

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Length: 24 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:cde:cdewps:127
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