Seasonal generosity takes a hit because of declining home equity

Harvard Business Review’s “Daily Stat”reported on a study that shows that homeowners give less when their home equity is down. They are more affected by loss of home equity than loss of other sources of wealth, such as stocks and bonds.

Households increase their gifts to charity by nearly 1% for every 10% increase in home equity. That’s about 10 times the effect of increase in other types of wealth, such as stocks and bonds, says Chau Do and Irina Paley of the U.S. Treasure. The finding may be ominous for charities: A long-lasting 20% decline in U.S. home equity would mean a $52-per-homeowner decrease in donations, or about $3.8 billion less for charities nationwide, the researchers say.

The idea that people know what their home equity is — and know whether their house value is declining, stable, or rising — doesn’t surprise me at all.  “What’s my house worth?” is a frequently asked question in my personal and professional life.  Those same people have only a vague idea of how their paper investments (stocks, bonds…) are faring.
What is curious to me is that people feel much more financially secure or insecure based on their home equity. A house is an odd investment. Most investment vehicles do not have utility while they are declining or rising. Real property has the value of putting a roof over your head or generating rental income while it puts a roof over someone else’s head. The cost of housing, once purchased, is fairly stable. Mortgages are stable, or maybe even going down based on refinancing. The variation is in taxes and repair costs.
Your stocks, bonds, or other paper investments mean nothing until you cash them in for goods and services. And they are easier to cash in. Paper investments take a phone call or a couple of clicks on the computer to liquidate. Yet real property is much harder to liquidate for cash, were you in a pinch. Housing is notoriously slow to sell. So, owning a house is not a quick way out of financial trouble.
Why is it that people feel “rich” or “poor” based on their home equity. Shouldn’t they be counting their paper investments first? Are you a homeowner-Scrooge? If so, why?

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