Robert,
I gave a link to the google scholar pages for "housing wealth effect." There are many dozen articles that give estimates of the size of the housing wealth effect. Almost all of these estimates would be based almost entirely on people with positive equity in their homes because in times prior to the collapse of the bubble, almost no one had negative equity in their homes. Pick an article, there's a range of estimates, but I don't think you'll find any where the estimates for the wealth effect are zero or anything close to it.
Jerry,
please look at the numbers for negative equity and use whatever assumptions you want about its impact on spending. I'm using arithmetic and logic, if you want to bankers bad names, it's fine by me, but I think it helps explain the state of the economy.
- Dean
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