Financial and Housing Wealth

Abstract

Financial wealth and housing wealth are the two largest and most important assets held by a household in many countries, including the United States and the Netherlands. In the article published in 2001, “The Relationship between Financial and Housing Wealth: Evidence from Dutch Households,” Stefan Hochguertel and Arthur van Soest analyze financial and housing wealth in the Netherlands and attempt to determine how these two types of investment decisions are interrelated. In the past, studies similar to this one had focused only on the implications of housing decisions on financial wealth decisions and not vice versa. Hochguertel and van Soest develop an empirical model that explains how housing investment demand and financial wealth holdings impact one another. The authors’ goals were to determine if homeowners have different demand for financial wealth than renters, how house prices affect the probability of homeownership, and whether or not housing wealth is affected by the level of financial wealth held.