Does mortgage affect the mobility of homeowners with positive equity?

(January 3-5, 2015 AEA Annual Meetings Boston, USA)

48 Pages Posted: 16 Apr 2016 Last revised: 19 Jan 2024

See all articles by Manish Gupta

Manish Gupta

Nottingham University Business School

Date Written: September 30, 2023

Abstract

I examine the relationship between mobility and positive house equity. The Tax Reform Act of 1986 (TRA) eliminated interest tax deductions for personal loans, except for mortgages, increasing mortgage demand. The average mortgage debt increased by $10,000, reducing house equity by 5.4% and, consequently, reducing mobility by 2%. The effect was more pronounced in regions with depressed economic conditions. Homeowners with higher income and financial assets experienced a greater decline in mobility due to greater indebtedness. However, the mobility of homeowners with higher education remained unaffected. While renter mobility increased post-TRA, homeowner mobility declined due to lower house equity.

Keywords: Mobility, House equity, Mortgage interest tax deduction

JEL Classification: G18, G51, K34, J60, R20

Suggested Citation

Gupta, Manish, Does mortgage affect the mobility of homeowners with positive equity? (September 30, 2023). (January 3-5, 2015 AEA Annual Meetings Boston, USA), Available at SSRN: https://ssrn.com/abstract=2764972 or http://dx.doi.org/10.2139/ssrn.2764972

Manish Gupta (Contact Author)

Nottingham University Business School ( email )

University of Nottingham
Jubilee Campus
Nottingham, NG8 1BB
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
77
Abstract Views
1,282
Rank
586,777
PlumX Metrics