Can the Consumption–Wealth Ratio Predict Housing Returns? Evidence from OECD Countries. (1st February 2016)

• Record Type: Journal Article
• Authors: Caporale, Guglielmo Maria; Sousa, Ricardo M.; Wohar, Mark E.
• Is Part Of: Real estate economics. Volume 47:Number 4(2019)
• Page Start: 935
• Page End: 976
• Publication Date: 2016-02-01
• Subjects: Real estate business -- United States -- Periodicals; Urban economics -- Periodicals; 333.33097
• DOI: 10.1111/1540-6229.12135
• Languages: English
• ISSNs: 1080-8620

Abstract

Abstract: We use a representative consumer model to analyze the relation between the transitory deviations of consumption from its common trend with aggregate wealth and labor income, cay, and the housing risk premium. The evidence based on data for 15 OECD countries shows that, if financial and housing assets are seen as complements, investors will temporarily allow consumption to rise when they expect a rise in future housing returns. By contrast, if housing assets are treated as substitutes for financial assets, consumption will be reduced.