If underwater homeowners are hesitant to sell their homes and move for new jobs, as some have conjectured, then the housing crisis has perhaps exacerbated the nation’s high unemployment rate.
The Fed researchers point out, “If a job is available, the economic benefit of accepting it outweighs the potential costs of disposing of the home.”
The researchers find that mobility did decline during the housing crisis, particularly in states with high levels of underwater homeowners.
In 2006 and 2007, the rate of homeowners moving to another state was more than 1 percent in 37 states. In 2008 and 2009, that number decreased to 23 states.
In Arizona, where 51 percent of homeowners were underwater in late 2009, the mobility rate decreased from 1.7 percent in 2007 to 1.4 percent in two years later.
Similarly in California, 35 percent of homeowners were underwater at the end of 2009, and the mobility rate declined from 0.8 percent in 2007 to 0.6 percent in 2009.
However, high underwater rates occurring alongside declining mobility rates does not necessarily signify a cause and effect relationship.
After further examination, the Cleveland Fed found “negative equity does not limit job-related mobility and, hence, is not a major reason for elevated aggregate unemployment in the United States.”
In fact, the opposite appears to be true. “Our results show that individuals with low equity actually move more than those with high equity,” the researchers said.
Homeowners with homes valued at less than 80 percent of their mortgage debt are more likely to move for a job than homeowners with 20 percent positive equity in their homes by about 1 percent, according to the study.
By Krista Franks Brock