We use individual and zip code level data, and exploit cross-sectional variation in house price growth to estimate the impact of rising home values on borrowing and spending. We use the Saiz (2010) housing supply elasticity of a CBSA as an instrument for house price growth, and focus on the heterogeneous effects of house price gains on borrowing and spending.
The question we seek to answer is: Are housing wealth shocks also shocks to cash on hand? We answer this question by empirically estimating how changes in housing wealth affect household borrowing and spending decisions.
I miss the step on how to get housing wealth shocks as opposed to general equilibrium changes in housing prices. In general, changes in housing wealth are not necessarily exogenous and unanticipated. How does the housing elasticity help to extrapolate exogenous price movements in the housing sector?