Housing prices and perception of wealth

Looking at the effect the increase in housing prices on people's perception of wealth.

So again, has the housing bubble created a wealth illusion? It does seem that many Americans feel wealthier because of the large increases in home equity in recent years. However, it is difficult to gauge how people feel about their wealth. The most obvious way to demonstrate that we feel wealthier because of increases in home equity is by measuring how much equity many Americans have pulled out of their homes in recent years. As we have seen in this paper, the numbers are enormous. Most people will not use their homes as a piggybank unless they are feeling pretty good about your wealth (or if they are very desperate “it doesn't appear that many people fall into this category). Based on this, it is safe to say that most of us are feeling wealthier these days because of the soaring prices of our homes.

 

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