Housing Activity and Consumer Spending |
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Authors: | Jonathan McCarthy Charles Steindel |
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Institution: | (1) Research Department, Federal Reserve Bank of New York, New York, NY 10045, USA |
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Abstract: | The current expansion has seen record-high levels of
transactions in housing, extraordinary growth in the aggregate
value of owner-occupied housing, and large increases
in the amount of funds realized from the
refinancing of mortgage debt. Many analysts thus have
pointed to the strong housing market and rising home
prices as a major pillar supporting recent economic growth
and have expressed concern that a contraction in housing activity and values could pose a significant risk to consumer
spending and real economic growth. This paper explores
the channels by which the housing market may
affect consumer spending and assesses the potential risk
from a softening in the housing market. Our assessment is
that while a housing slowdown by itself may slow consumer
spending some, it is probably insufficient to precipitate
a downturn without some additional shocks outside of
the sector.
JEL Classification E21,R21 |
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Keywords: | housing consumer spending equity prices |
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