The Influence of Housing and Durables on Personal Saving
The rate of national saving declined sharply in the 1980s. Some of the explanations for this puzzling performance have considered the influence of capital gains, a reduction in the need for precautionary saving, a decline in the need for retirement saving, the effect of slower income growth, and a host of other factors.
This article explores the relationship between personal saving and the treatment of owner-occupied housing and consumer durable goods in the national income and product accounts. It examhaes the potential consequences of understating the returns on owner-occupied houses and overstating the consumption of services of durable goods. The article concludes that the greater value of homeowners' investment in their residences after the 1970s and, to a lesser extent, rising outlays for consumer durable goods in the 1980s, depressed reported personal saving during the last decade, as the national accounts underestimated income and overestimated consumption.