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Housing equity, residential mobility and commuting

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Abstract
Highly productive economies require a flexible labor force with workers that move in accordance with the changing demand for goods and services. In times with falling housing prices, home owning workers’ mobility may be hampered by a lock-in effect from low and negative equity. This paper explores the effect of housing equity on homeowners’ residential mobility and their commuting pattern. We merge administrative registers for the Danish population and properties and get highly reliable micro data for our analysis. We compare the lock-in of homeowners with high LTV ratios under a booming economy with the lock-in when the economy is in recession. Low and negative equity reduces residential mobility, with similar relative effects in boom and slump periods. The negative impact on labor market flexibility from low equity lock-in is stronger when the economy is in recession and housing prices are falling. We show that this is mitigated by a comparatively high propensity to commute for locked-in homeowners when the labor market tightens.

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  • Bloze, Gintautas & Skak, Morten, 2015. "Housing equity, residential mobility and commuting," Discussion Papers on Economics 16/2015, University of Southern Denmark, Department of Economics.
    • Handle: RePEc:hhs:sdueko:2015_016
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    Cited by:

    1. Bonakdar, Said Benjamin, 2019. "Endogenous segregation dynamics and housing market interactions: An ABM approach," Ruhr Economic Papers 819, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Sander van Veldhuizen & Bart Voogt & Benedikt Vogt & Andrea Morescalchi, 2017. "Negative home equity and job mobility," CPB Discussion Paper 345, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    4. Komarek, Timothy M. & Butts, Kyle & Wagner, Gary A., 2022. "Government Contracting, Labor Intensity, and the Local Effects of Fiscal Consolidation: Evidence from the Budget Control Act of 2011," Journal of Urban Economics, Elsevier, vol. 132(C).
    5. Sander van Veldhuizen & Bart Voogt & Benedikt Vogt & Andrea Morescalchi, 2017. "Negative home equity and job mobility," CPB Discussion Paper 345.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. John P. Harding & Jing Li & Stuart S. Rosenthal & Xirui Zhang, 2022. "Forced moves and home maintenance: The amplifying effects of mortgage payment burden on underwater homeowners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 498-533, June.
    7. Salari, Mahmoud & Javid, Roxana J., 2019. "How does female labor force participation impact on housing values?," Research in Economics, Elsevier, vol. 73(2), pages 129-137.

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    More about this item

    Keywords

    Mobility; Commuting; LTV ratio; Home equitiy; Mortgage lock-in;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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