Discussion Papers of Business and Economics
Department of Business and Economics, University of Southern Denmark
Housing equity, residential mobility and commuting
() and Morten Skak
Abstract: Highly productive economies require a flexible labor force
with workers that move in accordance with the changing demand for goods and
services. In times with falling housing prices, home owning workers’
mobility may be hampered by a lock-in effect from low and negative equity.
This paper explores the effect of housing equity on homeowners’ residential
mobility and their commuting pattern. We merge administrative registers for
the Danish population and properties and get highly reliable micro data for
our analysis. We compare the lock-in of homeowners with high LTV ratios
under a booming economy with the lock-in when the economy is in recession.
Low and negative equity reduces residential mobility, with similar relative
effects in boom and slump periods. The negative impact on labor market
flexibility from low equity lock-in is stronger when the economy is in
recession and housing prices are falling. We show that this is mitigated by
a comparatively high propensity to commute for locked-in homeowners when
the labor market tightens.
Keywords: Mobility; Commuting; LTV ratio; Home equitiy; Mortgage lock-in; (follow links to similar papers)
JEL-Codes: G21; J61; R23; R51; (follow links to similar papers)
30 pages, December 15, 2015
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