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Decreasing house prices and household mobility: An empirical study on loss aversion and negative equity

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  • Joep Steegmans
  • Wolter Hassink

Abstract

This paper examines the effects of loss aversion and negative equity on household mobility. We stress the importance of studying these mechanisms simultaneously. By making use of a unique administrative data set of Statistics Netherlands, covering the period 2006–2011, we estimate the effects of loss aversion and negative equity. The results provide strong evidence for loss aversion, while less evidence is found for a lock‐in effect of negative equity. The results indicate that moderately underwater households do have a lower mobility, but heavily underwater households do not. Additional results indicate that the particularly high mobility of heavily underwater households is not default‐driven.

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  • Joep Steegmans & Wolter Hassink, 2018. "Decreasing house prices and household mobility: An empirical study on loss aversion and negative equity," Journal of Regional Science, Wiley Blackwell, vol. 58(3), pages 611-634, June.
    • Handle: RePEc:bla:jregsc:v:58:y:2018:i:3:p:611-634
    DOI: 10.1111/jors.12380
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    Cited by:

    1. van Veldhuizen, Sander & Vogt, Benedikt & Voogt, Bart, 2020. "Negative home equity reduces household mobility: Evidence from administrative data," Journal of Housing Economics, Elsevier, vol. 47(C).
    2. Akshita Singh & Shailendra Kumar & Utkarsh Goel & Amar Johri, 2023. "Behavioural biases in real estate investment: a literature review and future research agenda," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
    3. Hassink, Wolter & Zweerink, Jochem, 2021. "Housing careers and the Great Recession," Journal of Housing Economics, Elsevier, vol. 51(C).
    4. Meekes, Jordy & Hassink, Wolter H.J., 2019. "The role of the housing market in workers′ resilience to job displacement after firm bankruptcy," Journal of Urban Economics, Elsevier, vol. 109(C), pages 41-65.

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