Is Housing Wealth An 'ATM'? the Relationship Between Household Wealth, Home Equity withdrawal, and Saving Rates
IMF Working Papers, June 1, 2006
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- Is Housing Wealth An 'ATM'? the Relationship Between Household Wealth, Home Equity withdrawal, and Saving Rates
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Bibliographic details
- Authors: Vladimir Klyuev, Paul S. Mills
- Published: June 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451864229.001
Summary
- This paper examines the role increasing personal wealth and home equity withdrawal (HEW) have had in the decline in the personal saving rate in the United States.
- The analysis compares the U.S. experience with those of Australia, Canada, and the United Kingdom.
- Mortgage market liberalization and innovation are argued to reduce household cash flow and collateral constraints while making housing wealth more liquid as HEW becomes easier over time.
- Regression analysis indicates the expected negative relationship between U.S. saving and net worth, with a somewhat smaller coefficient than in previous studies.
- HEW is estimated to have a temporary negative impact on saving "of the order of 20 cents on the dollar."
Key findings and estimates
- Negative relationship between U.S. saving and net worth confirmed by regression analysis; coefficient is somewhat smaller than in previous studies.
- Home equity withdrawal (HEW) has a temporary negative effect on saving quantified as "of the order of 20 cents on the dollar."
- Mortgage market changes (liberalization and innovation) are linked to greater housing wealth liquidity and easier HEW, which in turn affect household saving behavior and constraints.
Comparative perspective
- Cross-country comparison includes Australia, Canada, and the United Kingdom to contextualize the U.S. experience.
- The paper highlights how mortgage market liberalization and mortgage product innovation can alter household liquidity and collateral access across these countries, influencing HEW and saving rates.
Methodology overview
- Regression analysis is used to estimate the relationship between saving, net worth, and HEW in the United States.
- The paper assesses temporal effects of HEW on saving (temporary negative impact quantified as above).
- Comparative analysis across four countries (United States, Australia, Canada, United Kingdom) supports interpretation of institutional and market drivers.
Subjects and keywords (as stated in the source)
- Subjects: Consumption, Financial institutions, Housing, Housing prices, Mortgages, National accounts, Prices, Stocks
- Keywords: Consumption, credit scoring, financial asset, home equity, home equity withdrawal, Household Saving, Housing, Housing Finance, Housing prices, housing wealth, inflation rate, mortgage innovation, mortgage product, mortgage securitization, Mortgages, net saving, rate, rate change, role HEW, saving rate, saving ratio, Stocks, WP