There has been a deal of talk about the possibility that ‘wealth effects’ from declining housing prices might be weighing on spending. It's important to remember, though, that people's reaction to a fall in prices is likely to depend partly on how far prices had increased previously. https://www.rba.gov.au/speeches/2019/sp-ag-2019-03-26.html  5/17  3/26/2019  What's Up (and Down) With Households?
| Speeches | RBA  Graph 5  Some recent work by colleagues at the Bank suggests that the link is a bit more subtle than simply that increases in wealth boost spending directly (May, Nodari and Rees 2019). It isn't so much that people wake up one morning, realise their home is worth more, and decide to go out shopping.