House Price Experiences and Consumer Spending

I examine the effects of local house price experiences on households' consumption decisions. A one-standard-deviation increase in experienced price growth (a weighted average of past price growth in local housing markets) leads to a 2 to 6 percentage points more real spending of households. Results hold when using experienced price growth of geographically distant relatives as an instrument. Effects are similar for homeowners and renters. Additionally, younger renters spend more on food than older renters when experiencing higher local price growth. These findings are consistent with higher experiences increasing households' expectations about future house prices and discouraging renters from homeowning.