EFFECT OF HOUSING PRICE ON HEALTH: EVIDENCE FROM THE UNITED STATES

Abstract

Housing is a substantial component of wealth for many households. Like the economy, housing also experiences cycles. The nature of a housing cycle is characterized by periods of increases and decreases in housing prices. When there is a period of sustained decrease in housing prices, households have lower housing wealth and hence lower propensity to consume. This deters households’ consumption activities and might affect the lifestyle decisions they adopt, such as working longer hours amounting to lesser leisure time which can have negative health outcomes. Hence, it is pertinent to study the relationship between housing price movements and health. Pre-existing literature review is dominated by studies of determinants of health and the relevant channels in which these factors affect health. Nonetheless, this study extends the body of literature on the impact of housing prices on health outcomes, shedding new light on an under-explored measurement of health, namely physical health. In view of the 2007 United States housing crisis that saw the burst of a housing bubble which subsequently plagued U.S. with a major recession from 2009-2010, the U.S. government has since been increasingly motivated in reviewing housing and economic policies to maintain the general population well-being. Based on this rationale, this study thus seeks to investigate the physical health effects of housing price movements in 51 states in the U.S, from 1997 to 2010. The results conclude a positive relationship between physical health and housing prices and suggest that for a one unit increase in the price of a single-family home, the difference in the logs of expected counts for poor physical health days would be expected to decrease by 0.00366 units. This suggests that a rise in housing equity improves physical health outcomes. Contrasting effects of age on physical health were also found whereby it appears that when age increases, physical health deteriorates to a larger extent for older adults.