Homeowner Mobility–Why Are “Underwater” Homeowners Staying Put?

via Knowledge@Wharton

How has the housing bust and accompanying recession impacted the mobility of homeowners? Why are “underwater” homeowners staying put?  Professor Joseph Gyourko,  examined this issue — and what it means for business and consumers.

Wharton research shows that mobility drops 30% for homeowners with negative equity in their properties, and each additional $1,000 in mortgage or property tax costs cuts mobility by 10% to 16%.

The Wharton research shows that “people will stay in a house a long time even when they have negative equity,” Gyourko notes. “That’s the problem,” he adds, emphasizing that the reluctance to move is contributing to higher unemployment rates. Gyourko says there are many reasons a homeowner will stay in a house, even if it might make more sense to get out and move on to find a new job in an area where there are more prospects. “Maybe they like the school district or other good things in the community. Or they don’t want to take the hit to their credit if they default.” Moreover, he states, many people feel a “moral or ethical duty” to make good on loans they promised to pay off.

Read more about homeowner mobility in Knowledge@Wharton’s full report


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