Wealth, Composition, Housing, Income, and Consumption

The present research, which covers the latest residential boom and bust cycle, highlights that there are no uniform or constant time invariant wealth, housing, and income relations. Even more important, wealth composition is shown to be a significant determinant of consumption. The marginal effects of housing wealth, financial wealth, and income differ substantially with wealth composition. Households with the highest percentage of net worth in financial assets have much lower income effects, have substantially higher marginal effects associated with stock holdings, and have housing equity effects that differ noticeably from other households. Income effects for groups with the smallest amounts of relative financial wealth are dramatically higher than for households with greater financial wealth. Wealth and its composition affect consumption.