Why do Households Concentrate Their Wealth in Housing?

John D. Benjamin (), Peter Chinloy () and G. Donald Jud ()
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John D. Benjamin: Department of Finance and Real Estate, Kogod School of Business, American University, 4400 Massachusetts Avenue, NW Washington, DC 20016
Peter Chinloy: Department of Finance and Real Estate, Kogod School of Business, American University, 4400 Massachusetts Avenue, NW Washington, DC 20016
G. Donald Jud: Department of Finance, School of Business, University of North Carolina, Greensboro, North Carolina 27412

Journal of Real Estate Research, 2004, vol. 26, issue 4, pages 329-344

Abstract: An apparent paradox in household wealth accumulation in the United States is the relatively small holding of financial assets and the large holding of housing wealth. To explain the high concentration of household wealth in housing, this paper estimates the marginal propensity to consume from housing and from financial assets. A higher marginal propensity to consume from housing rather than from financial assets would lead households to concentrate their wealth in real estate. For aggregate U.S. quarterly data from 1952:1 to 2002:2, the marginal propensity to consume from housing is higher than that from financial wealth. These conditions provide a rationale for the concentration of household assets in housing.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2004
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