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Housing busts and household mobility: an update

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  • Fernando Ferreira
  • Joseph Gyourko
  • Joseph Tracy

Abstract

This paper provides updated estimates of the impact of three financial frictions—negative equity, mortgage lock-in, and property tax lock-in—on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohl’s (2011) critique of our earlier work (2010). Our updated estimates corroborate our previous results: Negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10 to 16 percent. Schulhofer-Wohl’s finding of a slight positive correlation between mobility and negative equity appears due to a large fraction of false positives, as his coding methodology has the propensity to misclassify almost half of the additional moves it identifies relative to our measure of permanent moves. This also makes his mobility measure dynamically inconsistent, as many transitions originally classified as a move are reclassified as a nonmove when additional AHS panels become available. We conclude with directions for future research, including potential improvements to measures of household mobility.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 526.

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Date of creation: 2011
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Handle: RePEc:fip:fednsr:526

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Keywords: Housing - Finance ; Equity ; Mortgages ; Property tax;

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References

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  1. Sam Schulhofer-Wohl, 2010. "Negative equity does not reduce homeowners' mobility," Working Papers 682, Federal Reserve Bank of Minneapolis.
  2. Fernando Ferreira, 2008. "You Can Take it With You: Proposition 13 Tax Benefits, Residential Mobility, and Willingness to Pay for Housing Amenities," Working Papers 08-15, Center for Economic Studies, U.S. Census Bureau.
  3. Orley Ashenfelter & Alan Krueger, 1992. "Estimates of the Economic Return to Schooling from a New Sample of Twins," Working Papers 683, Princeton University, Department of Economics, Industrial Relations Section..
  4. Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 379-406, May.
  5. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," NBER Working Papers 13236, National Bureau of Economic Research, Inc.
  6. Hanushek, Eric A. & Quigley, John M., 1979. "The dynamics of the housing market: A stock adjustment model of housing consumption," Journal of Urban Economics, Elsevier, vol. 6(1), pages 90-111, January.
  7. Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2008. "Housing Busts and Household Mobility," NBER Working Papers 14310, National Bureau of Economic Research, Inc.
  8. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
  9. 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.
  10. Quigley, John M, 1987. "Interest Rate Variations, Mortgage Prepayments and Household Mobility," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 636-43, November.
  11. 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.
  12. 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.
  13. Nada Wasi & Michelle J. White, 2005. "Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13," NBER Working Papers 11108, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cunningham, Chris & Reed, Robert R., 2013. "Negative equity and wages," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 841-849.
  2. Coulson, N. Edward & Grieco, Paul L.E., 2013. "Mobility and mortgages: Evidence from the PSID," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 1-7.
  3. Edward P. Lazear & James R. Spletzer, 2012. "The United States Labor Market: Status Quo or A New Normal?," NBER Working Papers 18386, National Bureau of Economic Research, Inc.
  4. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
  5. Chris Cunningham & Robert R. Reed, 2012. "Housing wealth and wage bargaining," Working Paper 2012-20, Federal Reserve Bank of Atlanta.
  6. Joseph Gyourko & Joseph Tracy, 2013. "Unemloyment and Unobserved Credit Risk in the FHA Single Family Mortgage Insurance Fund," NBER Working Papers 18880, National Bureau of Economic Research, Inc.
  7. Andrew Caplin & Anna Cororaton & Joseph Tracy, 2012. "Is the FHA Creating Sustainable Homeownership?," NBER Working Papers 18190, National Bureau of Economic Research, Inc.
  8. Davis, Morris A. & Fisher, Jonas D. M. & Veracierto, Marcelo, 2013. "Gross Migration, Housing and Urban Population Dynamics," Working Paper Series WP-2013-19, Federal Reserve Bank of Chicago.
  9. Brian K. Bucks & Jesse Bricker, 2013. "Household mobility over the Great Recession: evidence from the U.S. 2007-09 Survey of Consumer Finances panel," Finance and Economics Discussion Series 2013-53, Board of Governors of the Federal Reserve System (U.S.).
  10. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.
  11. Teemu Lyytikäinen & Hilber & A. L. Christian, 2013. "Housing transfer taxes and household mobility: Distortion on the housing or labour market?," Working Papers 47, Government Institute for Economic Research Finland (VATT).

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