Price Expectations, Distressed Mortgage Markets and the Housing Wealth Effect

June 30, 2017 | Journal Article

Front cover of Real Estate Economics journal Authors: Yvonne McCarthy , Kieran McQuinn
Real Estate Economics

Using a unique combination of regulatory and survey microdata, we examine the importance of the life cycle theory of consumption in estimating housing wealth effects for the Irish mortgage market. Since the recent financial crisis, this market has experienced substantial house price declines and negative equity. Thus, house price expectations are likely to be important in influencing housing wealth effects. We find a positive correlation between consumption and changes in housing wealth among our sample of mortgaged Irish households. Furthermore, we find that this positive association only exists when housing wealth changes are perceived to be of a permanent nature.

  • Publication Details

    Journal Article

    ESRI Series Number: 201638
    Research Area: Macroeconomics
    Date of Publication: June 30, 2017
    Published Online: December 24, 2015
    Publisher: Wiley
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