Open AccessInternational Real Estate Review
Author(s) -
Yuming Li,
Laura Yue Liu
Publication year - 2014
Publication title -
journal of the asian real estate society
Language(s) - English
Resource type - Journals
ISSN - 1029-6131
DOI - 10.53383/100190
Subject(s) - economics , real estate , volatility (finance) , wealth effect , equity (law) , national wealth , stock market , labour economics , house price , monetary economics , financial economics , finance , monetary policy , paleontology , horse , political science , law , biology
In this research, we compare the effect of aggregate U.S. financial wealth with the effect of aggregate U.S. labor income on house prices at the national and city levels. Financial wealth is measured by the net worth of U.S. households minus the equity of owners in home real estate or by the aggregate U.S. stock market index. After adjusting for the volatility of each explanatory variable, we find the economic impact of growth in financial wealth on the aggregate U.S. house price appreciation to be statistically significant and similar to that of labor income growth. We also find a significant wealth effect on some of the city-level house price appreciations. For the cities where both wealth and income effects are significant, the economic impacts of the two effects are found to be similar. While labor income growth has a contemporaneous effect on the house price appreciation, change in financial wealth, and in particular, the stock market, leads house price appreciation but not vice versa.