In this paper, we estimate expected return on housing by exploiting information from the variations in the consumption-wealth ratio. We combine a present-value model of consumption with an unobserved component model to express the excess consumption-assets ratio (consumption in excess of labor...

The strong consumption growth in a period of falling stock market and a moderate recession in the U.S. has sparked off a debate about the role of housing wealth as one of the determinants of consumption. The literature is divided over the issue whether the effect of change in the financial...