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House prices, homeownership, and household consumption: Evidence from household panel data in Korea

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  • Lee, Seungyoon

Abstract

Using Korean household panel data, this paper investigates the impact of house price changes on household consumption, focusing on asymmetric responses across homeownership status and the direction of house price fluctuations. I find that rising house prices have little influence on household consumption, whereas a decrease in house prices brings about a substantial impact. Falling house prices reduce homeowners’ consumption and raise renters’ consumption, implying that the opposing pressures on two household groups could substantially offset each other. The responses are found to be asymmetric across several aspects of household heterogeneities. Owners of multiple houses or relatively larger residences and older owners show greater responses. In response to rising house prices, homeowners with loan-to-value ratios at the standard cutoff level for a home equity line of credit substantially increase their consumption. Several pieces of evidence support the operation of the wealth effect and collateral effect channels.

Suggested Citation

  • Lee, Seungyoon, 2023. "House prices, homeownership, and household consumption: Evidence from household panel data in Korea," Economic Modelling, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323001670
    DOI: 10.1016/j.econmod.2023.106355
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    More about this item

    Keywords

    House price; Household consumption; Wealth effect; Collateral effect; Household panel data;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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