Impact of House Price Changes on Durable and Non-Durable Consumption in the United States

Sujata Saha ()
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Sujata Saha: Wabash College

International Real Estate Review, 2023, vol. 26, issue 1, 73-93

Abstract: This paper examines the symmetric and asymmetric effects of house price changes and a few other macroeconomic variables on durable and non-durable consumption separately. The study considers the nonlinear panel Autoregressive Distributed Lag (ARDL) approach (Pooled Mean Group (PMG) estimation (Pesaran, 1997; Pesaran et al., 1999)) for cointegration and error-correction modeling, and uses annual data from fifty states of the U.S. The results show that changes in house prices have asymmetric effects on both durable and non-durable consumption in the long run. To dig deeper into the relationship between house price and consumption, I divide the fifty U.S. states into three categories: high-, middle- and low-income states. This helps to examine how the responsiveness of durable and non-durable consumption varies across these three categories. The findings show that the low-income states are affected more by changes in house prices than that of the high- and middle-income states.

Keywords: Nonlinear ARDL; Asymmetry; House Prices; Consumption (search for similar items in EconPapers)
JEL-codes: E21 E30 R3 (search for similar items in EconPapers)
Date: 2023
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