ICS Magazine

Rising home values damping stock impact

July 17, 2002
WASHINGTON, July 17 (Reuters) - Federal Reserve Chairman Alan Greenspan said on Wednesday that rising home values have "significantly tempered" the negative impact that drops in the stock market are having on consumer spending.

"Yes, we have had a reversal of the wealth effect but it has been very significantly tempered by the continued existence of growth in home equity," Greenspan told the House Financial Services Committee.

The Fed chief said while the overall value of the stock market's decline exceeded the rise in home equity, consumers are more likely to tap home wealth for spending.

In addition, he said the stock market slide was a bigger factor for wealthier consumers, while home wealth was a more significant factor for lower-income groups.