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Spatial Lock-in: Do Falling House Prices Constrain Residential Mobility?

  • Sewin Chan

    ()

    (Rutgers University)

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    Falling house prices have caused numerous home owners to suffer capital losses. Those with little home equity may be prevented from moving because proceeds from the sale of their house are insufficient to repay their mortgage and provide a new down payment. A data set of mortgages is used to examine the magnitude of these constraints. Estimates show that average mobility would have been 24% higher after four years, had real house prices increased at 1980s rates, and 10% higher if house values had merely kept up with inflation. Among those with high initial loan-to-values, the differences are even greater.

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    File URL: ftp://snde.rutgers.edu/Rutgers/wp/1998-16.pdf
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    Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199816.

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    Date of creation: 06 Aug 1998
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    Handle: RePEc:rut:rutres:199816
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