Home-value declines crimp consumers more than portfolio losses
Consumers react more to changes in their home values than changes in
their investment portfolios, according to a recent study.
In fact, real estate economists at UCLA and the University of Southern
California found that a 10% decline in housing wealth from the 2005
highs would result in a $105 billion, or 1.2%, drop in personal
consumption expenditures.That 10% decline in home values translates to
roughly a 1 percentage-point
reduction in real GDP growth, researchers said.
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