Did the Housing Boom Increase Household Spending?

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The brief’s key findings are:

  • Regional variations in U.S. house prices provided a natural experiment to test how price changes influence household spending.
  • Households age 51 and over who saw rapid growth in house prices increased their spending on non-durables (e.g., meals out, vacations, and entertainment).
  • The annual increase was modest but, if sustained over time, could be substantial.
  • Interestingly, when house prices fell, households did not appear to tighten their belts.