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Housing activity, home values, and consumer spending

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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 a housing slowdown by itself may slow consumer spending and GDP growth some; however, it is probably insufficient to precipitate a downturn without some additional shocks outside of the sector.

Suggested Citation

  • Jonathan McCarthy & Charles Steindel, 2006. "Housing activity, home values, and consumer spending," Proceedings 1012, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhpr:1012
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    Cited by:

    1. Chau Do & Irina Paley, 2012. "Altruism from the house: the impact of home equity on charitable giving," Review of Economics of the Household, Springer, vol. 10(3), pages 375-393, September.
    2. Ermanno Affuso & John Reid Cummings & Donald Alex Beebe & Steven R. Schultze, 2022. "Endogenous, Regime-Switching Hedonic Estimation of Commercial Waterway Water Quality Impact on Home Values in the Alabama Black Belt," Sustainability, MDPI, vol. 14(18), pages 1-17, September.
    3. Salotti, Simone, 2008. "Global imbalances and household savings: the role of wealth," MPRA Paper 17729, University Library of Munich, Germany, revised 2009.

    More about this item

    Keywords

    Housing - Prices; Consumption (Economics);

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