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A look at the Duesenberry Effect, housing prices, and consumer spending.

In many high cost metropolitan areas housing is now consuming 40 to 50% of a family’s net income, a far cry from the conservative 28% which most financial experts suggest. As we are facing a housing led recession, will consumers adjust their spending habits in accordance with declines in home equity? I argue that they will not because of the Duesenberry Effect and the relationship is not a direct one.

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Read more from this blogger: Dr. Housing Bubble - How I learned to Love SoCal: Irrational Housing: Insiders out Early and The Duesenberry effect.