Housing busts and household mobility

Using two decades of American Housing Survey data from 1985 to 2007, we revisit the literature on lock-in effects and provide new estimates of the impacts of negative equity and rising interest rates on the mobility of owners. Both lead to substantially lower mobility rates. Owners suffering from negative equity are one-third less mobile, and every added $1000 in real annual mortgage costs lowers mobility by about 12%. Our results cannot simply be extrapolated to the future, but they do have potentially important implications for policy makers concerned about the consequences of the housing bust that began as our data series ended. In particular, they indicate that we need to begin considering the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.