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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 (Ferreira, Gyourko and Tracy (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%-16%. 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 non-move 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17405.

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Date of creation: Sep 2011
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Publication status: published as Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2012. "Housing busts and household mobility: an update," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 1-15.
Handle: RePEc:nbr:nberwo:17405

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  1. Schulhofer-Wohl, Sam, 2012. "Negative equity does not reduce homeowners’ mobility," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Feb, pages 1-17.
  2. 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.
  3. Ferreira, Fernando & Gyourko, Joseph & Tracy, Joseph, 2010. "Housing busts and household mobility," Journal of Urban Economics, Elsevier, vol. 68(1), pages 34-45, July.
  4. 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.
  5. Alan Krueger & Orley Ashenfelter, 1992. "Estimates of the Economic Return to Schooling from a New Sample of Twins," NBER Working Papers 4143, National Bureau of Economic Research, Inc.
  6. 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, MIT Press, vol. 110(2), pages 379-406, May.
  7. Fernando Ferreira, 2008. "You Can Take it With You: Proposition 13 Tax Benefits, Residential Mobility, and Willingness to Pay for Housing Amenities," Working Papers, Center for Economic Studies, U.S. Census Bureau 08-15, Center for Economic Studies, U.S. Census Bureau.
  8. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Working Papers, Center for Economic Studies, U.S. Census Bureau 07-27, Center for Economic Studies, U.S. Census Bureau.
  9. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series, Berkeley Program on Housing and Urban Policy qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
  10. 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, Federal Reserve Bank of Chicago, issue Sep.
  11. 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.
  12. 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.
  13. 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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Cited by:
  1. 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, Board of Governors of the Federal Reserve System (U.S.) 2013-53, Board of Governors of the Federal Reserve System (U.S.).
  2. Christian A. L. Hilber & Teemu Lyytikäinen, 2012. "The Effect of the UK Stamp Duty Land Tax on Household Mobility," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0115, Spatial Economics Research Centre, LSE.
  3. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0103, Spatial Economics Research Centre, LSE.
  4. Davis, Morris A. & Fisher, Jonas D. M. & Veracierto, Marcelo, 2013. "Gross Migration, Housing and Urban Population Dynamics," Working Paper Series, Federal Reserve Bank of Chicago WP-2013-19, Federal Reserve Bank of Chicago.
  5. Andrew Caplin & Anna Cororaton & Joseph Tracy, 2012. "Is the FHA Creating Sustainable Homeownership?," NBER Working Papers 18190, National Bureau of Economic Research, Inc.
  6. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.
  7. 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.
  8. Coulson, N. Edward & Grieco, Paul L.E., 2013. "Mobility and mortgages: Evidence from the PSID," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(1), pages 1-7.
  9. Cunningham, Chris & Reed, Robert R., 2013. "Negative equity and wages," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(6), pages 841-849.
  10. Chris Cunningham & Robert R. Reed, 2012. "Housing wealth and wage bargaining," Working Paper, Federal Reserve Bank of Atlanta 2012-20, Federal Reserve Bank of Atlanta.
  11. 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.
  12. Marcelo Veracierto & Jonas Fisher & Morris Davis, 2014. "Gross Migration, Housing and Urban Population Dynamics," 2014 Meeting Papers, Society for Economic Dynamics 324, Society for Economic Dynamics.

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