The New York Times Discovers the Housing Wealth Effect

In a bizarre article, the NYT told readers that, "economists have only recently devoted serious study to how a decline in housing prices affects consumer spending." Actually economists have studied the effect of house prices on consumption for close to a century.

The housing wealth effect is a well-known concept in economics, not something that economists have just stumbled upon. It is usually estimated as being between 5-7 cents on the dollar. This implies the loss of roughly $7 trillion in ...