TY  - JOUR
AU  - Calomiris,Charles
AU  - Longhofer,Stanley D.
AU  - Miles,William
TI  - The (Mythical?) Housing Wealth Effect
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15075
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15075
L1  - http://www.nber.org/papers/w15075.pdf
N1  - Author contact info:
Charles W. Calomiris
Graduate School of Business
Columbia University
3022 Broadway Street, Uris Hall
New York, NY 10027
Tel: 212/854-8748
Fax: 212/316-9219
E-Mail: cc374@columbia.edu

Stanley D. Longhofer
Director, Center for Real Estate
Barton School of Business
Wichita State University
Wichita, KS 67260-0077
E-Mail: stan.longhofer@wichita.edu

William Miles
Department of Economics
Wichita State University
Wichita, KS 67260-0077
E-Mail: mil122000@yahoo.com
AB  - Models used to guide policy, as well as some empirical studies, suggest that the effect of housing wealth on consumption is large and greater than the wealth effect on consumption from stock holdings.  Recent theoretical work, in contrast, argues that changes in housing wealth are offset by changes in housing consumption, meaning that unexpected shocks in housing wealth should have little effect on non-housing consumption. We reexamine the impact of housing wealth on non-housing consumption, employing the Case-Quigley-Shiller data on U.S. housing wealth that have been used in prior studies to estimate a large housing wealth effect.  Existing empirical work fails to control for the fact that changes in housing wealth may be correlated with changes in expected permanent income, biasing the resulting estimates.  Once we control for the endogeneity bias resulting from the correlation between housing wealth and permanent income, we find that housing wealth has a small and insignificant effect on consumption. Additional analysis of time-series results provides further support for that view.
ER  -