Housing Wealth Drives Consumer Spending More Than Stocks

(Wednesday, December 01, 2004) - 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.

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