Risk Attitude and Housing Wealth Effect

Liao, Wen‐Chi; Zhao, Daxuan; Sing, Tien Foo

doi:10.1007/s11146-013-9407-2

Cited by 10 publications

(8 citation statements)

References 29 publications

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“…In addition, the outcomes of our paper are consistent with other studies which have found that the relationship between wealth and consumption is contingent on other factors (e.g. Sierminska and Takhtamanova 2012;Liao et al 2014;Khalifa et al 2013).…”

Section: Summary Of Resultssupporting

confidence: 91%

“…Several studies have also shown that the relative magnitude of this relationship is dependent upon different factors, such as household age (Attanasio et al 2009;Sierminska and Takhtamanova 2012), the institutional structure of a country (Case et al 2005), households' attitudes toward risk (Liao et al 2014), income levels (Khalifa et al 2013), households' level of stock ownership (Poterba 2000), macroeconomic fluctuations (Muellbauer and Murphy 2008), and level of financial development (Peltonen et al 2012).…”

Section: Introductionmentioning

confidence: 99%

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Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence

Fereidouni

Tajaddini

2015

J Real Estate Finan Econ

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The objective of this paper is to examine the role of consumer confidence on the relationship between two forms of wealth-housing and financial-and four categories of consumption expenditure, which include total consumption, service, durable goods and nondurable goods consumption. This paper uses U.S. quarterly data from 1978 to 2012 for its analysis. Applying the FMOLS estimation method, the results show that consumer confidence has a positive effect on the association between housing wealth and consumption expenditure, whereas its effect on the association between financial wealth and consumption expenditure is negative. The implications of these results are discussed.

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Section: Summary Of Resultssupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence

Fereidouni

Tajaddini

2015

J Real Estate Finan Econ

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“…In our sample, stock holdings of households comprise their risky assets. Following the two‐step process applied by Liao, Zhao and Sing (), we first use a tobit model to predict the ratio of risky assets to liquid assets, using the demographic and financial information of households from the UHS database. We then divide the sample into high‐risk aversion group and low‐risk aversion group, using the median value as the threshold level.…”

Section: Resultsmentioning

confidence: 99%

How Does Mortgage Debt Affect Household Consumption? Micro Evidence from China

Fan

Yavaş

2018

Real Estate Economics

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Abstract:The high growth rate of mortgage debt in various emerging and developed economies has captured headlines following the financial crisis. In this paper, we investigate how mortgage debt impacts household consumption behavior and various components of household consumption. Utilizing a comprehensive household survey data from China, we show that households with a mortgage consume a higher portion of their income than households without a mortgage. This is in line with the argument that having a mortgage reduces the uncertainty that the household faces regarding how much to save each month in order to be able to own a house, and this reduced uncertainty leads to lower monthly savings for the purpose of buying a house. We also find that among households with a mortgage, those who spend a larger share of their income on mortgage payments spend less of their income on consumption, reflecting the crowding out effect of mortgage payments on household consumption. Furthermore, we show that a government policy of decreasing the maximum loan-to-value ratio has a significant impact on the consumption behavior of households. The current paper offers the first evidence of the impact of growing mortgage debt on the consumption behavior of households. Our results will have implications for government policies that encourage mortgage borrowing.JEL Classification: E21, D14, G21

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“…Previous studies have examined other factors that affect the size of the housing wealth effect. The most studied factors are household characteristics such as the age of household head (Campbell and Cocco, 2007), credit constraints (Bostic et al, 2009), wealth composition, income level (Guo and Hardin, 2014) and risk attitudes (Liao et al, 2014). Other factors are market conditions and structure.…”

Section: Introductionmentioning

confidence: 99%

“…Similarly, the consumption of households with larger portions of their wealth in housing is more sensitive to property value fluctuations (Guo and Hardin, 2014). However, risk-averse households are less likely to consume more due to an increase in their housing wealth (Liao et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

Housing wealth effects for private and subsidized homeowners

Wong

Deng

Cheung

2018

IJHMA

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Purpose This paper aims to examine the effect of housing wealth on household consumption when there are resale and refinancing constraints that prevent housing assets from being cashed out. Design/methodology/approach Based on Household Expenditure Survey data in Hong Kong from 1999 to 2010, regression analysis is applied to compare the housing wealth effects of private and subsidized homeowners. Propensity score matching is adopted to ensure that the two groups of homeowners share similar household income. Further regression analysis is conducted to examine private homeowners’ consumption when their recourse mortgages are in negative equity. Findings Subsidized homeowners, who are not allowed to resell their units before sharing their capital gain with the government, experienced an insignificant housing wealth effect. While private homeowners experienced a significant housing wealth effect, the effect was weakened in the presence of a resale constraint induced by negative equity. The results remain robust after the application of more rigorous sample selection through propensity score matching. Research limitations/implications The analyses are subject to two potential data limitations. One is a relatively small sample size. The other is that data on financial assets and mortgages are unavailable and have to be indirectly controlled through household characteristics. Nevertheless, our estimated marginal propensity to consume out of housing wealth is 0.03 of the annual household consumption for private homeowners, which is within the range of estimates reported in previous literature. Practical implications This study shows that the housing wealth effect enjoyed in the private sector does not necessarily apply to the subsidized sector where resale and refinancing constraints exist. This is not to suggest that the constraints be removed. Rather, policymakers should be aware of the tradeoff: while the constraints ensure that government subsidies are used to assist home ownership, not capital gain, they also bring about consumption inequality in a society, especially in a booming housing market. Originality/value Our findings extend the literature on the housing wealth effect, which has been exclusively focusing on private homeowners, to subsidized homeowners. This study also adds to the literature on housing welfare by highlighting that the resale constraints of subsidized housing can weaken the housing wealth effect.

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Risk Attitude and Housing Wealth Effect

Cited by 10 publications

References 29 publications

Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence

Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence

How Does Mortgage Debt Affect Household Consumption? Micro Evidence from China

Housing wealth effects for private and subsidized homeowners

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