4min chapter

The Joe Walker Podcast cover image

Housing Bubble Week: Can We Predict Housing Bubbles? - Dean Baker

The Joe Walker Podcast

CHAPTER

The Wealth Effect: A Psychological Phenomenon

Florida and Nevada, two of the states with among the highest foreclosure rates in the US, were actually RACO states. The idea is that as you get more wealth, then you'll increase your consumption independent of your income. This cuts both ways; when prices fall and people fall into negative equity, that can generate a negative wealth effect.

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