Household Finance by Sumit Agarwal & Wenlan Qian & Ruth Tan

Author:Sumit Agarwal & Wenlan Qian & Ruth Tan
Language: eng
Format: epub
ISBN: 9789811555268
Publisher: Springer Singapore

It is often the most expensive consumer durable good since house prices generally are equivalent to a multiple of annual household incomes. Fluctuations in house prices tend to affect household behavior, consumption and investment, thereby directly impacting the level of macroeconomic activity.

Real estate is important to the banking sector as well since mortgages and home equity loans constitute a large fraction of bank credit. Fluctuations in house prices can affect the value of collateral and hence the financial soundness of lending institutions. In 2017, out of the US$14.6 trillion in US household debt, US$9.8 trillion or 67% comprise mortgage loans (Beshears et al. 2018).

The real estate sector creates jobs for many not only when the house is being built but also after it has been purchased. New homeowners spend on furniture, appliances and landscaping generating a multiplier effect on other sectors of the economy.

In addition, land sales and stamp duties on real estate transactions are important sources of government revenue.

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