Korea Real Estate Review 2023 KCI Impact Factor : 0.56
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pISSN : 2092-5395 / eISSN : 2733-8339
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A Study on the Housing Wealth Effect Change by Household’s Risk Aversion
- Korea Real Estate Review
- 2013, 23(2), pp.95-116
- Publisher : korea real estate research institute
- Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate
1건국대학교
Accredited
ABSTRACT
The studies of the housing wealth effect (HWE) concern the relationships between consumption changes and house price appreciation. This paper examines whether HWE is dependent upon households’ attitudes toward risk. Using a model in which the household makes leverage decisions with empirically plausible korea parameter values, HWE is a decreasing function of the households’relative risk aversion.
The effect is positive for less risk averse households, but it can be negative among households who are highly risk averse. In the case of household with no credit constraint, When risk aversion parameter is 0.1, each one million won increase in home value can increase consumption by 88 thousand won. Households with a lower initial loan to value ratio experience greater HWE. This suggests that households who are less credit constraint are more able to mortgage refinancing to fund extra consumption. And grouping households according to their degrees of risk aversion, we estimate the effect of house price growth on consumption growth for each group. The empirical results are consistent with our model prediction. The HWE varies significantly across groups, and it is decreasing in risk aversion.
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