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How Does Home Equity Affect Mobility?

33 Pages Posted: 3 Nov 2012 Last revised: 17 Aug 2013

Fredrik Andersson

Office of the Comptroller of the Currency (OCC)

Tom Mayock

Government of the United States of America - Office of the Comptroller of the Currency (OCC); UNC Charlotte

Date Written: November 2, 2012

Abstract

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.

Keywords: Mobility, Negative Equity, Mortgage Default

JEL Classification: R23, J61

Suggested Citation

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

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 - Office of the Comptroller of the Currency (OCC) ( email )

400 7th St Sw
Washington, DC 20219-0001
United States

UNC Charlotte ( email )

Charlotte, NC 28223
United States

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