Estimation of the Housing Wealth Effect

Abstract

This study estimates housing wealth effects on consumption in Korea using Fully Modifided OLS. The data used for analysis are times series data from the first quarter of 1991 to the first quarter of 2022. According to the analysis results, an increase in the housing price only increases consumption expenditures for durable goods such as automobiles, home appliances, and furniture, and other households' consumption expenditures and final consumption expenditures decrease. Due to the relatively high housing price compared to the past, it is difficult for households with houses to increase their mortgage value due to the increase in housing prices, and the effect of capital gains from housing disposal is also insignificant. On the other hand, in the case of households without housing, an increase in housing prices leads to an increase in housing costs, resulting in a contraction in consumption. Thus, in terms of macroeconomics, a device for stabilizing the housing market is required.