Housing Busts and Household Mobility: An Update

30 Pages Posted: 16 Nov 2011

See all articles by Fernando V. Ferreira

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

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 15, 2011

Abstract

This paper provides updated estimates of the impact of three financial frictions — negative equity, mortgage lock-in, and property tax lock-in — on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohl’s (2011) critique of our earlier work (2010). Our updated estimates corroborate our previous results: Negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10 to 16 percent. Schulhofer-Wohl’s finding of a slight positive correlation between mobility and negative equity appears due to a large fraction of false positives, as his coding methodology has the propensity to misclassify almost half of the additional moves it identifies relative to our measure of permanent moves. This also makes his mobility measure dynamically inconsistent, as many transitions originally classified as a move are reclassified as a nonmove when additional AHS panels become available. We conclude with directions for future research, including potential improvements to measures of household mobility.

Keywords: negative equity, mobility

JEL Classification: R21, R31, R38

Suggested Citation

Ferreira, Fernando V. and Gyourko, Joseph E. and Tracy, Joseph, Housing Busts and Household Mobility: An Update (November 15, 2011). FRB of New York Staff Report No. 526, Available at SSRN: https://ssrn.com/abstract=1959939 or http://dx.doi.org/10.2139/ssrn.1959939

Fernando V. Ferreira

University of Pennsylvania - The Wharton School ( email )

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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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