Mobility and mortgages: Evidence from the PSID

We use the 1999–2009 Panel Survey of Income Dynamics to estimate household move probabilities as a function of, among other things, current housing equity. The lock-in effect supposes that mobility decreases with the mortgage loan-to-value ratio, particularly as equity becomes negative. We find that while owners do move less than renters, the move probability increases as homeowners become underwater. The propensity to move out of state in particular increases dramatically for sand state homeowners who have negative equity. There is no lock in effect from negative equity.

► We model household migration as a function of loan-to-value ratio. ► Underwater households are more likely to move, especially out-of-state. ► This is especially true for “sand states” which had large housing price increases.