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Sunday, December 13, 2009

Housing Bust and Mobility

by Calculated Risk on 12/13/2009 10:06:00 PM

A couple more articles on the impact of the housing bust on mobility ...

From Patrick Coolican at the Las Vegas Sun: Mobility bust bad for Vegas

“Vegas is going to be disproportionately affected by the absolute crashing halt of interstate migration,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State University.

About 4.7 million Americans moved from one state to another in 2007 and 2008, according to the Census Bureau. That’s just 55 percent of the total in 1999 and 2000. Geographers and economists think the number will plummet further this year.
“People are underwater on their homes and that affects mobility,” said Isabel Sawhill, a Brookings Institution economist.
Geographic mobility is what economists call “countercyclical.” When a recession hits, people usually move to where the jobs are. Job-related stasis — staying put in one’s job versus hitting the road in search of a better one — is unique to this recession.
And a personal tale from Brian Fitzgerald at the WSJ: Confessions of an Underwater Homeowner
We never considered purposefully defaulting ... Although, if I were laid off and unemployed for more than a few months we might have to. ... if I was offered a job in another city, we wouldn't be able to sell.
There is much more in Fitzgerald's story, but this bit on mobility is important - he can't sell, and he can't move to change jobs - and just like most Americans trapped underwater, he is trying to stick it out and hoping for the best.

Worker mobility has always been a significant positive for the U.S. economy, and this decline in mobility is one of the long lasting tragedies of the bubble. As I wrote almost two years ago:
Less worker mobility [due to negative equity] is kind of like arteriosclerosis of the economy. It lowers the overall growth potential.

Perhaps as many as 15 to 20 million households will be saddled with negative equity by 2009. Even if most of these homeowners don't "walk away", there might still be a negative impact on the economy due to less worker mobility.