HOUSING WEALTH DRIVES CONSUMER SPENDING
MORE THAN STOCKS

A recent study by the Joint Center for Housing Studies at Harvard University and Macroeconomic Advisers, LLC, concludes that housing wealth has a greater effect on a consumer’s spending habits than his or her stock wealth. According to the study, which was commissioned by the National Association of Realtors (NAR), consumers are more confident about their appreciation of home value than their gain in the stock market because they realize near-term gains in a stock market may not last.

"Housing produces a quicker lift to the economy, while home-price growth provides lasting benefits," said David Lereah, chief economist of the NAR. "Homeowners are more confident of gains in housing wealth, so they spend more readily and quickly when they occur."

Lereath does not seem to be concerned about a housing bubble.

"The fundamentals of a growing population, tight supply of homes available for sale and rising construction costs will support home prices moving forward," he said.

The NAR economist noted that homeownership has a greater effect than stocks on households' finances.

"The broader distribution of homeownership means that changes in stock wealth affect a much smaller share of households and mostly affects those with disposable incomes," he said. "Homeownership is unique in that it provides shelter in addition to being an investment that yields a financial return as values rise."

"We have too many high-sounding words and too few actions that correspond with them."  – Abigail Adams

"The vices of leisure are gotten rid of by being busy."  – Cicero

"Doubt is not a pleasant condition, but certainty is absurd."   – Voltaire

"Silence is one of the hardest arguments to refute."   – Josh Billings

"My problem lies in reconciling my gross habits with my net income."
                                                                                  – Errol Flynn