A Household Housing Portfolio Channel of QE Transmission

We propose a household housing portfolio channel of quantitative easing (QE) transmission. QE induces households to rebalance portfolios from bonds to houses, lowering their expected future returns and thus stimulating consumption and output. We document this channel using both regional and household-level data in Germany in the context of a housing boom without credit boom. We show that, at the regional level, QE raises output growth more in regions in which land is scarcer, through lower rental yields. At the household level, following QE, wealthier households rebalance their portfolios toward housing and consume more. The household portfolio rebalancing that we document is stronger when we focus on purchases of second homes, consistent with a and buy-to-let motive.