Underwater homeowners are willing to move, despite losing money on their homes, new research shows.
In fact, owners who owe more on their mortgage than their home is currently worth are more willing to move away if a job opportunity arises than even homeowners with equity, according to researchers with the Federal Reserve Bank of Cleveland.
The research, based on data from credit bureaus, aims to debunk a popular theory that underwater owners have been held back by their lack of equity status. Dubbed the “lock-in effect,” the theory suggests that those with negative equity have avoided moving for a job due to being underwater.
The latest research shows that owners with homes worth less than 80 percent of their mortgage debt were one percent more likely to move for a new job in a given year compared to those who held 20 percent of equity in their homes.
“If a hypothetical unemployed, underwater homeowner gets a job offer, he is going to take it,” says reearcher Yuliya Demyanyk.
“An implication for national policymakers is that job creation efforts need not focus on the regions hit hardest by the housing bust. Consider that at the end of 2009, the underwater problem was concentrated in four sand states – Arizona, Florida, California, and Nevada – and in Michigan, all with negative equity rates topping 35 percent of total mortgages,” Demyanyk wrote in the research paper.
“If national policymakers thought only about creating jobs in those states out of fear that negative-equity borrowers wouldn’t move to other states for employment, they might be missing an opportunity to lift employment more broadly.”