Housing Busts and Household Mobility: An Update
- The relationship between household mobility and financial frictions, especially those associated with negative home equity, has attracted greater attention following the recent volatility in the U.S. housing markets.
- The decline in mortgage rates, along with policy interventions to encourage historically low-rate refinancing, likewise recommend a closer look at mortgage interest rate lock-in effects, which are apt to become important once Federal Reserve interest rate policy normalizes.
- This article updates estimates in a 2010 study by the authors of the impact of three financial frictions—negative equity, mortgage interest rate lock-in, and property tax lock-in—on household mobility. The addition of 2009 American Housing Survey data to their sample allows the authors to incorporate the effect of more recent house price declines.
- The new study’s findings corroborate the 2010 results: Negative home equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs lowers it by 10 to 16 percent
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