Housing market developments and household consumption

Daragh Clancy, Mary Cussen and Reamonn Lydon ()

No 09/EL/14, Economic Letters from Central Bank of Ireland

Abstract: Changes in household consumption, which accounts for more than half of gross domestic demand expenditure, can have a significant impact on output and employment growth. This Economic Letter looks at the main drivers of household consumption, paying particular attention to the impact of the housing market. It highlights three inter- related ways in which housing affects consumption: (i) housing wealth effects; (ii) changes in credit usage and credit conditions; and (iii) activity effects. All three played a role in driving up durables consumption in particular during the housing boom of the early 2000s.

Date: 2014-09
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