The Housing Wealth Effect in the Post-Great Recession Period: Evidence from Big Data

Farrell, Diana; Greig, Fiona; Zhao, Chen

doi:10.2139/ssrn.3641841

Cited by 2 publications

(3 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Consequently, the influence of the HEE shock dropped to that of the 1977 level. The results in Figures 3 and 5 show a near-zero impact of housing wealth on consumption after 2010, which is consistent with the findings in Farrell et al (2020), which uses the account data of 1.4 million bank customers. Unlike their study, we also document that HEE has a much stronger impact than home equity and the impact varies with credit supply.…”

Section: Responses To Housing and Hee Shockssupporting

confidence: 87%

“…However, their estimated average MPC for the entire period is in line with that of other studies. Farrell et al (2020) show that the MPC of housing wealth between 2012 and 2019 is near zero, using individual account-level mortgage, deposit account, and credit card data for 1.7 million bank customers based on an ordinary least squares (OLS) regression.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Thus, the influence of housing wealth on consumption may be overestimated if these common factors are ignored. Recent evidence shows that increasing housing wealth has economically significant effects on consumption for the period leading up to the 2007 financial crisis (Aladangady, 2017, Kaplan et al, 2020, Guren and McQuade, 2020, Farrell et al, 2020.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

International Real Estate Review

Li¹,

Zhu²

2020

IRER

View full text Add to dashboard Cite

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.

show abstract

Section: Responses To Housing and Hee Shockssupporting

confidence: 87%

Section: Literature Reviewmentioning

confidence: 99%