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Housing equity, residential mobility and commuting

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Highly productive economies require a flexible labor force with workers that move in accordance with the changing demand for goods and services. In times with falling housing prices, home owning workers’ mobility may be hampered by a lock-in effect from low and negative equity. This paper explores the effect of housing equity on homeowners’ residential mobility and their commuting pattern. We merge administrative registers for the Danish population and properties and get highly reliable micro data for our analysis. We compare the lock-in of homeowners with high LTV ratios under a booming economy with the lock-in when the economy is in recession. Low and negative equity reduces residential mobility, with similar relative effects in boom and slump periods. The negative impact on labor market flexibility from low equity lock-in is stronger when the economy is in recession and housing prices are falling. We show that this is mitigated by a comparatively high propensity to commute for locked-in homeowners when the labor market tightens.

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  • Bloze, Gintautas & Skak, Morten, 2015. "Housing equity, residential mobility and commuting," Discussion Papers of Business and Economics 16/2015, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2015_016
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    Cited by:

    1. Bonakdar, Said Benjamin, 2019. "Endogenous segregation dynamics and housing market interactions: An ABM approach," Ruhr Economic Papers 819, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Sander van Veldhuizen & Bart Voogt & Benedikt Vogt & Andrea Morescalchi, 2017. "Negative home equity and job mobility," CPB Discussion Paper 345.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Sander van Veldhuizen & Bart Voogt & Benedikt Vogt & Andrea Morescalchi, 2017. "Negative home equity and job mobility," CPB Discussion Paper 345, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Salari, Mahmoud & Javid, Roxana J., 2019. "How does female labor force participation impact on housing values?," Research in Economics, Elsevier, vol. 73(2), pages 129-137.

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    More about this item

    Keywords

    Mobility; Commuting; LTV ratio; Home equitiy; Mortgage lock-in;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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