The housing wealth effect: The role of renovations and home improvements

Francesco G. Caloia, Mauro Mastrogiacomo*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


This paper tests whether disregarding home improvements biases the housing wealth effect, that is, the marginal propensity to consume out of housing wealth. We decompose housing wealth changes in their unanticipated and exogenous component by filtering out previously elicited expectations of house prices and by dealing with endogenous home improvements. Results show that the bias is zero due to the zero correlation between home investments and changes in house values. Results are consistent with models with exogenous maintenance and with the evidence that maintenance contrasts depreciation and is mostly value-preserving. A comparative empirical approach excludes that results are only internally valid.

Original languageEnglish
Pages (from-to)1532-1547
Number of pages16
JournalReal Estate Economics
Issue number6
Early online date9 Apr 2022
Publication statusPublished - Nov 2022

Bibliographical note

Publisher Copyright:
© 2022 The Authors. Real Estate Economics published by Wiley Periodicals LLC on behalf of American Real Estate and Urban Economics Association.


  • expectations
  • home improvements
  • housing wealth effect
  • maintenance
  • renovations

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