Sunday, October 02, 2005

The Wealth Effect

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"The sharply rising value of housing in recent years has created a “wealth effect” that has contributed significantly to consumer spending growth — not unlike that created in the late 1990s by the boom in stock prices. In fact the housing wealth effect is even more powerful, with homeowners spending an average of 5 cents for every dollar in increased home value they enjoy, compared with 3 cents for every dollar in the increased value of stocks and bonds, said Richard DeKaser, chief economist for National City, a Cleveland-based bank."

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