“Back to Work” sometimes sits and wonders. We understand the gravity of indicators such as unemployment, bankruptcies, foreclosures and so on.
But what is it actually like for people who are seeking a job? Are more of the unemployed, whether laborers or professionals, leaving town? Or is it only certain professionals who are seeking the exit? Do obstacles vary from field to field when it comes to finding a job? And so on.
In that light, new research looks at a question that formed the title of an earlier post in “Back to Work”: “How do you move to a job if your house is underwater?” The conclusion: being underwater may actually push people into packing their bags and moving out of state.
Let’s first look at yet another indicator. According to a recent report by CoreLogic, 2 of every 3 houses in the Las Vegas area are “underwater,” a term everyone now recognizes as meaning a house is worth less than what the owners owe to the bank. So the question of whether being in that situation affects the ability of people who are out of work to actually get up and move if a job becomes available elsewhere is an important one.
“Back to Work” has come across a study in economist Mike Konczal’s excellent blog, “Rortybomb.” The study, “Locked in the house: do underwater mortgages reduce labor market mobility?” looks systematically at mobility within the same county and state and from one state to another, in areas that have seen housing values crash. The term of art: “lock-in effect,” meaning, does being underwater lock you into your house?
The study’s conclusion:
We find evidence of a significant lock-in effect due to house price declines and (presumably) negative homeowner equity. The overall propensity of a household to move in any given year is lower in counties that experienced larger declines in house prices. Further analysis shows, however, that the entire decline results from a drop in within-state moves that are less likely to be related to job market matching. In particular, local moves are significantly negatively impacted by declines in local housing values: the steeper the house price decline, the greater the drop in local mobility. Long distance moves, in contrast, do not decline in response to a drop in local house prices. Indeed, we find higher out-of-state mobility in counties with larger house price declines. This suggests that, rather than restricting mobility, severe house price declines may trigger moves out of state, and thus may actually reinforce job mobility related to regional economic shocks.
So there you go. “Severe house price declines” — something we continue to see in the Las Vegas Valley — “may trigger moves out of state.”
Konczal looked at this question back in April, summarizing other bits of research. Back then, he concluded,
It looks like people with high negative equity might have even higher mobility than others, meaning they are more likely to rent out their place or simply walk away.
Gee, that rings a bell now, doesn’t it? Now the only thing left to do is to set up a study of people out of work in the Las Vegas area who are homeowners and see if they are leaving their houses behind for jobs in other states. Again, as mentioned earlier, are some professionals more likely to fit this pattern than others? And if they are leaving Las Vegas, what does that mean for the future of the local workforce?
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