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Housing busts and household mobility

  • Fernando Ferreira
  • Joseph Gyourko
  • Joseph Tracy

Using two decades of American Housing Survey data from 1985 to 2005, we estimate the influence of negative home equity and rising mortgage interest rates on household mobility. We find that both factors lead to lower, not higher, mobility rates over time. The effects are economically large -- mobility is almost 50 percent lower for owners with negative equity in their homes. This finding does not imply that current concerns over defaults and homeowners having to relocate are entirely misplaced. It does indicate that, in the past, the mortgage lock-in effects of these two factors were dominant over time. Policymakers may wish to begin considering the consequences of mortgage lock-in and reduced household mobility because they are quite different from the consequences associated with default and higher mobility.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 350.

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Date of creation: 2008
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Handle: RePEc:fip:fednsr:350
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  2. 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.
  3. Ferreira, Fernando, 2010. "You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 661-673, October.
  4. 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.
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  15. 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.
  16. Andrew F. Haughwout & Richard Peach & Joseph Tracy, 2008. "Juvenile delinquent mortgages: bad credit or bad economy?," Staff Reports 341, Federal Reserve Bank of New York.
  17. Kristopher S. Gerardi & Adam Hale Shapiro & Paul S. Willen, 2007. "Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures," Working Papers 07-15, Federal Reserve Bank of Boston.
  18. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
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