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Price Expectations, Distressed Mortgage Markets and the Housing Wealth Effect
Author(s) -
McCarthy Yvonne,
McQuinn Kieran
Publication year - 2015
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12125
Subject(s) - economics , irish , microdata (statistics) , wealth effect , consumption (sociology) , equity (law) , monetary economics , house price , financial crisis , financial economics , macroeconomics , monetary policy , population , philosophy , linguistics , social science , demography , sociology , political science , law , census
Using a unique combination of regulatory and survey microdata, we examine the importance of the life cycle theory of consumption in estimating housing wealth effects for the Irish mortgage market. Since the recent financial crisis, this market has experienced substantial house price declines and negative equity. Thus, house price expectations are likely to be important in influencing housing wealth effects. We find a positive correlation between consumption and changes in housing wealth among our sample of mortgaged Irish households. Furthermore, we find that this positive association only exists when housing wealth changes are perceived to be of a permanent nature.