IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Did the Housing Boom Increase Household Spending?

  • Shenyi Jiang
  • Wei Sun
  • Anthony Webb
Registered author(s):

Between 1995 and 2007, inflation-adjusted house prices more than doubled in some areas of the United States. During this unprecedented boom, households spent more and reduced their saving rate. A key question is how much of the increased spending was related to rising house prices, as opposed to other factors? And, if households spent more when prices soared, are they likely to cut back during the housing bust? The answers can help in assessing retirement saving trends. This brief uses the Health and Retirement Study to examine the spending behavior of older households during the housing boom and subsequent bust. It compares changes in spending on non-durable goods (e.g., meals out, vacations, and entertainment) of households in areas with rapid growth in house prices to those in areas with relatively stable prices. The results show that rising house prices led to a modest increase in annual consumption that, if sustained over time, could eat up a significant portion of the gain. Interestingly, the study also finds that house­holds experiencing a decline in house prices do not correspondingly reduce their consumption. This brief is organized as follows. The first section covers the economic intuition behind how house­holds might react to changes in house prices. The second section describes the data and methodology. The third section presents the results. The final section concludes that households may undermine their retirement security if they spend their gains but ignore their losses.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://crr.bc.edu/briefs/did-the-housing-boom-increase-household-spending/
Download Restriction: no

Paper provided by Center for Retirement Research in its series Issues in Brief with number ib2011-10.

as
in new window

Length: 7 pages
Date of creation: Aug 2011
Date of revision: Aug 2011
Handle: RePEc:crr:issbrf:ib2011-10
Contact details of provider: Postal: Hovey House, 140 Commonwealth Avenue, Chestnut Hill, MA 02467
Phone: (617) 552-1762
Fax: (617) 552-0191
Web page: http://crr.bc.edu/
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:crr:issbrf:ib2011-10. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Grzybowski)

or (Christopher F Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.