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How Does Home Equity Affect Mobility?

Fredrik Andersson

Office of the Comptroller of the Currency (OCC)

Tom Mayock

Government of the United States of America - Risk Analysis Division

November 2, 2012

This paper investigates the relationship between home equity and household mobility. We first develop a simple theoretical model that suggests a non-unidirectional mobility-equity relationship. We test this hypothesis using a dataset from Florida that allows us to construct home equity measures that are more accurate than those that have been used in previous work and permits us to disentangle mortgage default-induced mobility from other types of mobility. Our empirical results reveal a U-shaped relationship between equity and mobility; at moderate levels of mortgage debt, a decline in equity reduces the propensity to sell a home, whereas at very high levels of mortgage debt, an increase in debt increases mobility through the foreclosure channel. Although default-induced mobility did increase following the …financial crisis, this increase did little to o¤set the substantial decline in voluntary moves due to home equity lock-in; we …find that on net, household mobility declined by roughly 25 percent in Florida because of reductions in equity.

Number of Pages in PDF File: 33

Keywords: Mobility, Negative Equity, Mortgage Default

JEL Classification: R23, J61

working papers series

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Date posted: November 3, 2012 ; Last revised: August 17, 2013

Suggested Citation

Andersson, Fredrik and Mayock, Tom, How Does Home Equity Affect Mobility? (November 2, 2012). Available at SSRN: http://ssrn.com/abstract=2170444 or http://dx.doi.org/10.2139/ssrn.2170444

Contact Information

Per Fredrik Daniel Andersson (Contact Author)
Office of the Comptroller of the Currency (OCC) ( email )
400 7th St. SW
Washington, DC 20219-0001
United States
202-649-5528 (Phone)
571-465-3246 (Fax)
Tom Mayock
Government of the United States of America - Risk Analysis Division ( email )
250 E Street, SW
Washington, DC 20219
United States
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