October 29, 2008
Bloomberg News featured a new study by SPPD Professors Gary Painter and Raphael Bostic, along with Stuart Gabriel of the UCLA Ziman Center for Real Estate. The economists found that lunging home prices will cut economic growth in the U.S. more than the drop in stock prices this year. A 10 percent decline in housing wealth results in a $105 billion - or 1.2 percent - reduction in personal spending, according to the three-year study. Consumer spending accounts for about 70 percent of GDP, so that drop would result in a reduction in real GDP growth of 1 percentage point, the study found. "The reason, I believe, the effects are smaller for financial wealth than for housing wealth is that people tend to view those changes in housing wealth as more permanent," Painter said. "Consumption will be impacted by the decline in housing wealth for a while," he added. The study is scheduled to be published next year in the journal, Regional Science and Urban Economics.
Bloomberg News featured a new study by SPPD Professors Gary Painter and Raphael Bostic, along with Stuart Gabriel of the UCLA Ziman Center for Real Estate. The economists found that lunging home prices will cut economic growth in the U.S. more than the drop in stock prices this year. A 10 percent decline in housing wealth results in a $105 billion - or 1.2 percent - reduction in personal spending, according to the three-year study. Consumer spending accounts for about 70 percent of GDP, so that drop would result in a reduction in real GDP growth of 1 percentage point, the study found. "The reason, I believe, the effects are smaller for financial wealth than for housing wealth is that people tend to view those changes in housing wealth as more permanent," Painter said. "Consumption will be impacted by the decline in housing wealth for a while," he added. The study is scheduled to be published next year in the journal, Regional Science and Urban Economics.