scholarly journals International Real Estate Review

2020 ◽  
Vol 23 (4) ◽  
pp. 433-465
Author(s):  
Lingxiao Li ◽  
◽  
Bing Zhu ◽  
Keyword(s):  
Rapid Expansion ◽  
Wealth Effects ◽  
Housing Wealth ◽  
Home Equity ◽  
Marginal Propensity To Consume ◽  
Mortgage Securitization ◽  
Collateral Effect ◽  
Marginal Propensity ◽  
Housing Wealth Effects ◽  
Asset Backed Securities

This paper investigates two types of housing wealth effects: conventional housing wealth and collateral. We incorporate home equity extraction (HEE) and the influence of mortgage liberalization into the model in Campbell and Mankiw (1989). Based on U.S. data during the 1977Q1–2019Q4, our empirical results suggest that consumption is remarkably influenced by the use of HEE, rather than home equity. Furthermore, the rapid expansion of mortgage securitization significantly amplifies the collateral effect. Conditional on the use of HEE and the share of non-bank mortgage holdings, housing wealth has an average marginal propensity to consume (MPC) of 0.84 cents and a maximum MPC of 6.06 cents. In 2007, when market-based mortgage pools and issuers of asset-backed securities held more than 60% of home mortgages, the HEE shock explained for over 50% of the forecasting variance of consumption growth. The results provide evidence that with a focus on collateral value, lenders allow more equity withdrawal, which leads to higher consumption.

scholarly journals Housing Wealth Effects in Japan: Evidence Based on Household Micro Data

2019 ◽  
Vol 19 (2) ◽  
Author(s):  
Masahiro Hori ◽  
Takeshi Niizeki
Keyword(s):  
Wealth Effects ◽  
Evidence Based ◽  
Housing Wealth ◽  
Micro Data ◽  
Total Consumption ◽  
Marginal Propensity To Consume ◽  
Pseudo Panel ◽  
Marginal Propensity ◽  
Housing Wealth Effects ◽  
Do So

Abstract Using micro data covering almost 500,000 Japanese households over the period 1983–2012, we examine to what extent household consumption responds to changes in housing wealth. To do so, we estimate the housing wealth of individual households by matching several official statistics. Employing cross-section and pseudo-panel-based regressions, we find that the marginal propensity to consume (MPC) out of housing wealth is approximately 0.0008–0.0013 for nondurable consumption and 0.0059–0.0082 for total consumption. We further find that the consumption response of older households is larger than that of younger households, which is consistent with the pure wealth effects hypothesis.

scholarly journals Housing Wealth Effects: The Long View

2020 ◽  
Author(s):  
Adam M Guren ◽  
Alisdair McKay ◽  
Emi Nakamura ◽  
Jón Steinsson
Keyword(s):  
House Prices ◽  
House Price ◽  
Ordinary Least Squares ◽  
Wealth Effects ◽  
Housing Wealth ◽  
Income Risk ◽  
New Instrument ◽  
Housing Wealth Effect ◽  
Housing Wealth Effects ◽  
Standard Life

Abstract We provide new time-varying estimates of the housing wealth effect back to the 1980s. We use three identification strategies: ordinary least squares with a rich set of controls, the Saiz housing supply elasticity instrument, and a new instrument that exploits systematic differences in city-level exposure to regional house price cycles. All three identification strategies indicate that housing wealth elasticities were if anything slightly smaller in the 2000s than in earlier time periods. This implies that the important role housing played in the boom and bust of the 2000s was due to larger price movements rather than an increase in the sensitivity of consumption to house prices. Full-sample estimates based on our new instrument are smaller than recent estimates, though they remain economically important. We find no significant evidence of a boom–bust asymmetry in the housing wealth elasticity. We show that these empirical results are consistent with the behaviour of the housing wealth elasticity in a standard life-cycle model with borrowing constraints, uninsurable income risk, illiquid housing, and long-term mortgages. In our model, the housing wealth elasticity is relatively insensitive to changes in the distribution of loan-to-value (LTV) for two reasons: first, low-leverage homeowners account for a substantial and stable part of the aggregate housing wealth elasticity; second, a rightward shift in the LTV distribution increases not only the number of highly sensitive constrained agents but also the number of underwater agents whose consumption is insensitive to house prices.

scholarly journals Housing Wealth Effects: The Long View

2020 ◽  
Author(s):  
Adam M. Guren ◽  
Alisdair McKay ◽  
Emi Nakamura ◽  
Jon Steinsson
Keyword(s):  
Wealth Effects ◽  
Housing Wealth ◽  
Housing Wealth Effects

Household Balance Sheets, Consumption, and the Economic Slump*

2013 ◽  
Vol 128 (4) ◽  
pp. 1687-1726 ◽  
Author(s):  
Atif Mian ◽  
Kamalesh Rao ◽  
Amir Sufi
Keyword(s):  
Geographic Distribution ◽  
Risk Sharing ◽  
The United States ◽  
Housing Wealth ◽  
Balance Sheets ◽  
Net Worth ◽  
Distribution Of Wealth ◽  
Marginal Propensity To Consume ◽  
Marginal Propensity

Abstract We investigate the consumption consequences of the 2006–9 housing collapse using the highly unequal geographic distribution of wealth losses across the United States. We estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk-sharing. The average marginal propensity to consume (MPC) out of housing wealth is 5–7 cents with substantial heterogeneity across ZIP codes. ZIP codes with poorer and more levered households have a significantly higher MPC out of housing wealth. In line with the MPC result, ZIP codes experiencing larger wealth losses, particularly those with poorer and more levered households, experience a larger reduction in credit limits, refinancing likelihood, and credit scores. Our findings highlight the role of debt and the geographic distribution of wealth shocks in explaining the large and unequal decline in consumption from 2006 to 2009.

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