More and more the United States is becoming a nation of homeowners. Along with this rise in ownership, an increasing share of households’ wealth is invested in housing. However, house prices fluctuate over time. Some studies offer evidence that changes in house prices have had a large effect on total output and total consumption. In this article, Wenli Li and Rui Yao present their recent research, which tries to quantify the effects of house price changes on both consumption and the well-being of American households. Their study looks at the economy as a whole, as well as different demographic groups.

This article appeared in the First Quarter 2006 edition of Business Review.

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