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Negative equity does not reduce homeowners' mobility

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  • Sam Schulhofer-Wohl

Abstract

Some commentators have argued that the housing crisis may harm labor markets because homeowners who owe more than their homes are worth are less likely to move to places that have productive job opportunities. I show that, in the available data, negative equity does not make homeowners less mobile. In fact, homeowners who have negative equity are slightly more likely to move than homeowners who have positive equity. Ferreira, Gyourko, and Tracy's (2010) contrasting result that negative equity reduces mobility arises because they systematically drop some negative-equity homeowners' moves from the data.> some negative-equity homeowners' moves from the data.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 682.

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Date of creation: 2010
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Handle: RePEc:fip:fedmwp:682

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  1. Andrew Haughwout & Richard Peach & Joseph Tracy, 2009. "The homeownership gap," Staff Reports 418, Federal Reserve Bank of New York.
  2. Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2008. "Housing busts and household mobility," Staff Reports 350, Federal Reserve Bank of New York.
  3. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
  4. Daniel Aaronson & Jonathan Davis, 2011. "How much has house lock affected labor mobility and the unemployment rate?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Sep.
  5. Foote, Christopher L. & Gerardi, Kristopher & Willen, Paul S., 2008. "Negative equity and foreclosure: Theory and evidence," Journal of Urban Economics, Elsevier, vol. 64(2), pages 234-245, September.
  6. Andra C. Ghent & Marianna Kudlyak, 2010. "Recourse and residential mortgage default: theory and evidence from U.S. states," Working Paper 09-10, Federal Reserve Bank of Richmond.
  7. Chan, Sewin, 2001. "Spatial Lock-in: Do Falling House Prices Constrain Residential Mobility?," Journal of Urban Economics, Elsevier, vol. 49(3), pages 567-586, May.
  8. Engelhardt, Gary V., 2003. "Nominal loss aversion, housing equity constraints, and household mobility: evidence from the United States," Journal of Urban Economics, Elsevier, vol. 53(1), pages 171-195, January.
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