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Housing Busts and Household Mobility

31 Pages Posted: 20 Oct 2008  

Fernando V. Ferreira

University of Pennsylvania - The Wharton School

Joseph Gyourko

University of Pennsylvania - Real Estate Department; National Bureau of Economic Research (NBER)

Joseph S. Tracy

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2008

Abstract

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.

Keywords: household mobility, negative equity, mortgage lock-in

JEL Classification: R23, R21, R51

Suggested Citation

Ferreira, Fernando V. and Gyourko, Joseph and Tracy, Joseph S., Housing Busts and Household Mobility (October 1, 2008). FRB of New York Staff Report No. 350. Available at SSRN: https://ssrn.com/abstract=1285523 or http://dx.doi.org/10.2139/ssrn.1285523

Fernando V. Ferreira

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7181 (Phone)
215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~fferreir/

Joseph E. Gyourko

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States
215-898-3003 (Phone)
215-573-2220 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph Tracy (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6344 (Phone)
212-720-2630 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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