Financial and Housing Wealth, Expenditures and the Dividend to Ownership
For a household, home ownership provides necessary shelter, potential investment returns associated with property appreciation and a hedge against increased housing related cash outlays. In addition to potential appreciation, individual households benefit over time from a housing dividend defined as the difference between the market rent for the individual household’s housing unit and the household’s actual house ownership costs. The purchase of a house can substantially fix a household’s recurring housing related expenditures and generates a hedge (implied housing dividend) that increases with ownership tenure. This expenditure hedge (dividend) to home ownership is documented using pooled, cross-year samples from the Consumer Expenditure Survey (CEX). The housing dividend delivers a non-trivial effect on household non-housing expenditures after controlling for housing value, housing equity, financial assets and income.
KeywordsHousing Imputed rent Consumption Wealth effect Expenditure Dividend
JEL ClassificationD11 D12 G14 R21 R31
The authors would like to acknowledge Thesia Garner, Robert McClelland, Jonathan Skinner, participants at the 2014 Consumer Expenditure Survey Microdata Users’ Workshop at the Bureau of Labor Statistics, seminar participants at the Congressional Budget Office, and session participants at the 2014 Global Chinese Real Estate Conference in Nanjing, China.
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