Regular Article
Spatial Lock-in: Do Falling House Prices Constrain Residential Mobility?☆,☆☆

https://doi.org/10.1006/juec.2000.2205Get rights and content

Abstract

Falling house prices have caused numerous homeowners to suffer capital losses. Those with little home equity may be prevented from moving because of imperfections in housing finance markets: the proceeds from the sale of their home may be insufficient to repay their mortgage and provide a down payment on a new home. A data set of mortgages is used to examine the magnitude of these constraints. Estimates show that average mobility would have been 24% higher after 3 years had house prices not declined, and after 4 years, it would have been 33% higher. Among those with high initial loan-to-value ratios, the differences are even greater.

References (29)

  • G.J. Borjas et al.

    Self-selection and internal migration in the United States

    Journal of Urban Economics

    (1992)
  • J.K. Brueckner

    Borrower mobility, adverse selection and mortgage points

    Journal of Financial Intermediation

    (1994)
  • S. Chan

    Residential mobility and mortgages

    Regional Science and Urban Economics

    (1996)
  • R.J. Shiller

    Arithmetic repeat sales price estimators

    Journal of Housing Economics

    (1991)
  • R. Barro et al.

    Convergence across states and regions

    Brookings Papers on Economic Activity

    (1991)
  • T.J. Bartik

    Who Benefits from State and Local Economic Development Policies?

    (1991)
  • O. Blanchard et al.

    Regional evolutions

    Brookings Papers on Economic Activity

    (1992)
  • J.K. Brueckner et al.

    The rise and fall of the arm: an econometric analysis of mortgage choice

    Review of Economics and Statistics

    (1988)
  • J.K. Brueckner

    Consumption and investment motives and the portfolio choice of homeowners

    Journal of Real Estate Finance and Economics

    (1997)
  • A. Caplin et al.

    Housing Partnerships: A New Approach to a Market at a Crossroads

    (1997)
  • A. Caplin et al.

    Collateral damage: how refinancing constraints exacerbate regional recessions

    Journal of Money Credit Banking

    (1997)
  • K.E. Case et al.

    The behavior of home buyers in boom and post-boom markets

    New England Economic Review

    (1988)
  • J. DaVanzo

    Does unemployment affect migration? Evidence from micro data

    Review of Economics and Statistics

    (1978)
  • Y. Deng et al.

    Mortgage terminations, heterogeneity and the exercise of mortgage options

    Econometrica

    (2000)

    • Cited by (0)

    ☆

    published online March 21, 2001

    ☆☆

    I thank Andrew Caplin, Michael Cragg, Charles Freeman, and Joseph Tracy for their guidance and encouragement and Gary Engelhardt, Jan Brueckner, and two anonymous referees for helpful comments. The generosity of Chemical Bank in providing data and assistance is gratefully acknowledged.

    f1

    [email protected]

    View full text
    Copyright © 2001 Academic Press. All rights reserved.