ALAN GREENSPAN, the Federal Reserve chairman, said today that in some ways surging home prices give a greater kick to the economy than rising stock prices do.
Mr. Greenspan has pointed out with increasing frequency that the real estate market influences the personal finances of many households as much as, if not more, than the stock market does. In a speech today to America's Community Bankers, the trade group for the savings and loan industry, Mr. Greenspan fleshed out his point, relying in part on data from internal Federal Reserve studies.
By most measures, he said, gains in the stock market remain more important to increases in consumer spending than those from housing or any other asset market. The appreciation of stock prices has been ''vastly greater'' than that of home prices, he said, noting that housing accounted for one-sixth of what economists call the wealth effect -- the tendency of consumers to spend rather than hold or reinvest some of the gains they reap from rising asset values. The rest came overwhelmingly from Wall Street.
But he said the influence of rising home values on the economy would most likely grow in coming years. And he said that on a dollar for dollar basis, gains from the sale of a home translate into bigger increases in consumer spending than do gains from rising equity values, probably because consumers view rising house prices as much more of a sure thing than rising stock prices.
Stock market gains permanently lift the level of consumer outlays by 3 percent to 4 percent of the value of the gain, while the permanent increase in spending that results from gains in housing wealth appears to be about 5 percent, Mr. Greenspan said.
''The major reason for these significant differences in spending out of household wealth is doubtless that, while home prices do on occasion decline, large declines are rare,'' Mr. Greenspan said. The general experience for most homeowners, he said, ''is a modest but persistent rise in home values that is perceived to be largely permanent.''
The consistency of gains from housing stands in sharp contrast to ''volatile and often ephemeral gains in stock market wealth,'' Mr. Greenspan said.
Moreover, he said, most big gains in the stock market go to people in the highest income groups, whose spending patterns do not change much based on how their investments are doing. Capital gains from housing are concentrated further down the income scale, where they are more likely to be translated into higher spending levels.
Mr. Greenspan did not make any comment on the level of stock prices, and he did not give any clue as to whether the central bank will raise interest rates for a third time this year when its policy-setting committee meets in two weeks.
Instead, his remarks took a long-term view of trends in the housing industry and amounted to another session in Mr. Greenspan's long-running seminar on the forces reshaping the economy.
Over the years, the Fed chairman said, the portion of all home sales accounted for by newly built homes has declined, to about 16 percent in the last five years from 40 percent three decades ago. The reason is that new-home building tracks the growth rate in household formation, which has been declining.
During the 1990's, single-family home starts have averaged 1.10 million a year, down from 1.14 million in the 1970's, Mr. Greenspan said. Annual sales of existing homes have averaged about 4 million during the 1990's, he said, up from 2.8 million in the 1970's.
''The trend has important implications for economic activity beyond its impact on home building, because the sale of a newly constructed home does not generate capital gains financed through the mortgage market,'' Mr. Greenspan said. ''Sales of existing homes almost always do, and the purchasing power released through converting home equity to unencumbered cash can affect overall consumer demand and the economy, just as the stock market gains of recent years have boosted consumption.''
The Fed's research shows that the average capital gain over the last five years on the sale of an existing home, after accounting for transaction costs, was more than $25,000. Homeowners also tapped into their equity through home equity loans and by refinancing their loans in a way that allowed them to take some of their equity gains as cash, he said.
''To the average seller of an existing home, the equity extracted net of transaction costs generally far exceeds the down payment on his or her next home purchase,'' Mr. Greenspan said. A significant amount of the money, he added, ''is spent on consumer goods, especially on big ticket items in a manner not materially different from windfall income in general.''