Authors: Fernando Ferreira, Joseph Gyourko, and Joseph Tracy

Using two decades of American Housing Survey data from 1985 to 2005, we estimate the influence of negative home equity and rising mortgage interest rates on household mobility. We find that both factors lead to lower, not higher, mobility rates over time. The effects are economically large—mobility is almost 50 percent lower for owners with negative equity in their homes. This finding does not imply that current concerns over defaults and homeowners having to relocate are entirely misplaced.
It does indicate that, in the past, the mortgage lock-in
effects of these two factors were dominant over time. Policymakers may wish to begin considering the consequences of mortgage lock-in and reduced household mobility because they are quite different from the consequences associated with default and higher mobility.