Home Ownership May Actually Cause Unemployment (NY Times)

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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby laughlinlvr » Fri May 10, 2013 1:18 pm

I didn't have to read all this article to realize it's another case of "correlation does not necessarily signify causation."
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby core5 » Fri May 10, 2013 1:18 pm

The professors say they believe that high homeownership in an area leads to people staying put and commuting farther and farther to jobs, creating cost and congestion for companies and other workers. They speculate that the role of zoning may be important, as communities dominated by homeowners resort to “not in my backyard” efforts that block new businesses that could create jobs. Perhaps the energy sector would be less freewheeling in North Dakota if there were more homeowners.


That does make sense, but I imagine it would take a very long time for this to occur in one area. Their sample is 50 years.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby momar » Fri May 10, 2013 1:19 pm

laughlinlvr wrote:I didn't have to read all this article to realize it's another case of "correlation does not necessarily signify causation."

No offense, but this is the lamest line. The truth is that correlation can strongly imply causation, if there is a logical story behind it. If we could never infer anything from correlation, many fields of inquiry would not exist.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby dm200 » Fri May 10, 2013 1:28 pm

This seems a real stretch to me, and the unemployment rate is only one measure of economic health.

A few years ago, while attending a conference in NY City, we took a bus tour of parts of Manhattan, the Bronx and Harlem. The guy giving the tour (for this association) showed us some of the effects of large and massive movement of people and groups in NY City over decades, and how many of those quick and massive shifts had adverse affects on so many aspects of life and the economy of NY. He made the point that, because of the low home ownership rates and the large percentage of renters, such shifts could happen very quickly and massively. Had these folks been homeowners, perhaps the shifts would not have been so quick and massive.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby Calm Man » Fri May 10, 2013 2:26 pm

momar wrote:
laughlinlvr wrote:I didn't have to read all this article to realize it's another case of "correlation does not necessarily signify causation."

No offense, but this is the lamest line. The truth is that correlation can strongly imply causation, if there is a logical story behind it. If we could never infer anything from correlation, many fields of inquiry would not exist.


Momar, you are correct in that one has to consider that a correlation is real and not ever showing causation. The problem is there are many reasonable situations where causation is thought to exist and then don't. An easy one (of many) was the very obvious correlation of menopausal hormones and better heart health. Until it was rigorously tested in the Women's Health Initiative and found only not to hold but in some ways be deleterious to women's health. Others include tests of all of the vitamins previously thought to be "good".
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby momar » Fri May 10, 2013 2:41 pm

Calm Man wrote:
momar wrote:
laughlinlvr wrote:I didn't have to read all this article to realize it's another case of "correlation does not necessarily signify causation."

No offense, but this is the lamest line. The truth is that correlation can strongly imply causation, if there is a logical story behind it. If we could never infer anything from correlation, many fields of inquiry would not exist.


Momar, you are correct in that one has to consider that a correlation is real and not ever showing causation. The problem is there are many reasonable situations where causation is thought to exist and then don't. An easy one (of many) was the very obvious correlation of menopausal hormones and better heart health. Until it was rigorously tested in the Women's Health Initiative and found only not to hold but in some ways be deleterious to women's health. Others include tests of all of the vitamins previously thought to be "good".

I agree. Just because there is a plausible story doesn't mean there is causation.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby MoonOrb » Fri May 10, 2013 3:54 pm

The whole correlation/causation debate probably could have been avoided here if the title of the post more accurately reflected the contents of the article. The post title says "Home Ownership May Actually Cause Unemployment," when the article not only does not say so, but explicity acknowledges that the findings don't imply causation.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby statsnerd » Fri May 10, 2013 5:15 pm

MoonOrb wrote:The whole correlation/causation debate probably could have been avoided here if the title of the post more accurately reflected the contents of the article. The post title says "Home Ownership May Actually Cause Unemployment," when the article not only does not say so, but explicity acknowledges that the findings don't imply causation.


It's the title of the article too. Look at the URL or the title at the top of the browser when you open the article. I try to never editorialize titles.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby Valuethinker » Fri May 10, 2013 5:31 pm

As is often the case I am surprised at what Americans sometimes consider 'surprising'.

This is a fairly orthodox result, well studied in the UK-- Andrew Oswald at Warwick University amongst others.

The UK has a very high level of home ownership (over 60%- -Germany is 50%) and before that it had a high level of socially tenured housing (council houses for life). The UK is also known for its labour immobility (the jobs are in the south, where housing prices are very high, and the unemployed are in the north, where the old coal/ steel and heavy industry was).

Why is anyone surprised by this? It's been around for at least 20 years.

Self evidently, even in America, if people cannot sell their homes they will tend not to move. Even if unemployed.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby MoonOrb » Fri May 10, 2013 5:44 pm

statsnerd wrote:
MoonOrb wrote:The whole correlation/causation debate probably could have been avoided here if the title of the post more accurately reflected the contents of the article. The post title says "Home Ownership May Actually Cause Unemployment," when the article not only does not say so, but explicity acknowledges that the findings don't imply causation.


It's the title of the article too. Look at the URL or the title at the top of the browser when you open the article. I try to never editorialize titles.


So it is! Well, that's on the NY Times, then--I wish I had been more observant and grokked that before I replied. Sorry, statsnerd!
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby stratton » Fri May 10, 2013 7:08 pm

Lots of papers on this topic.

Donovan, Colleen and Schnure, Calvin, Locked in the House: Do Underwater Mortgages Reduce Labor Market Mobility? (May 31, 2011). Available at SSRN: http://ssrn.com/abstract=1856073 or http://dx.doi.org/10.2139/ssrn.1856073
The collapse of the housing boom led to an unprecedented number of homeowners who are “underwater,” that is, owe more on their mortgage than their homes are worth. These homeowners cannot move without incurring significant losses on their homes, possibly causing a “lock-in” effect reducing geographic mobility. This raises concerns that a reduction in labor market mobility may hamper the ability to move to accept employment in another geographic market, degrading labor market efficiency and contributing to higher structural unemployment.

This paper examines housing market turnover and finds significant evidence of a lock-in effect. The lock-in, however, results almost entirely from a decline in within-county moves. As local moves are generally within the same geographic job market, this decline is not likely to affect labor market matching. In contrast, moves out-of-state, which are more likely to be in response to new employment opportunities, show no decline, and in fact are higher in counties with greater house price declines. Housing market lock-in does not appear to have degraded the efficiency of the labor market and does not appear to have contributed to a higher unemployment rate.

Dohmen, Thomas J., Housing, Mobility and Unemployment (November 2000). IZA Discussion Paper No. 210. Available at SSRN: http://ssrn.com/abstract=252016
This paper develops a model that shows why high-skilled workers move more and are therefore unemployed less than low-skilled workers. The model can explain the paradoxical empirical regularity that higher owner-occupation rates are associated with higher levels of unemployment although home-owners tend to be unemployed less. The choice of housing tenure affects moving costs and thereby regional mobility and unemployment. The paper analyzes the impact of symmetric and asymmetric shocks on mobility and unemployment, and discusses effects of government intervention in the housing market. In addition, it is shown that moving costs reduce job search effort and search effectiveness.

Munch, Jakob Roland, Rosholm, Michael and Svarer, Michael, Are Home Owners Really More Unemployed? (September 2003). IZA Discussion Paper No. 872; University of Aarhus Economics Working Paper No. 2003-15. Available at SSRN: http://ssrn.com/abstract=442880
This paper investigates the effects of home-ownership on labour mobility and unemployment duration. We distinguish between finding employment locally or by being geographically mobile. We find that home ownership hampers the propensity to move for job reasons but improves the chances of finding local jobs, which is in accordance with the predictions from our theoretical model. The overall hazard rate into employment is higher for home owners, such that there is a negative correlation between home-ownership and unemployment duration. Our empirical findings thus lend some support for the main mechanism behind the so-called Oswald hypothesis, even if it does not find positive correlation between unemployment duration and home ownership at the individual level.

Demyanyk, Yuliya S., Hryshko, Dmytro, Luengo-Prado, Maria Jose and Sorensen, Bent E. , Moving to a Job: The Role of Home Equity, Debt, and Access to Credit (March 12, 2013). Available at SSRN: http://ssrn.com/abstract=2232332 or http://dx.doi.org/10.2139/ssrn.2232332
Using credit report data from two of the three major credit bureaus in the United States, we infer with high certainty whether households move to other labor markets defined by metropolitan areas. We estimate how moving patterns relate to labor market conditions, personal credit, and homeownership using panel regressions with fixed effects which control for all constant individual-specific traits. We interpret the patterns through simulations of a dynamic model of consumption, housing, and location choice. We find that homeowners with negative home equity move more than other homeowners, in particular when local unemployment growth is high – overall, negative home equity is not an important barrier to labor mobility.

Sterk, Vincent, Home Equity, Mobility, and Macroeconomic Fluctuations (October 1, 2010). De Nederlandsche Bank Working Paper No. 265. Available at SSRN: http://ssrn.com/abstract=1950081 or http://dx.doi.org/10.2139/ssrn.1950081
How does a fall in house prices affect real activity? This paper presents a business cycle model in which a decline in house prices reduces geographical mobility, creating distortions in the labor market. This happens because homeowners face declines in their home equity levels, after which it becomes more difficult to provide the down-payment required for a new mortgage loan. Unemployed homeowners therefore turn down job offers that would require them to move. The model explains joint cyclical patterns in housing and labor market aggregates, as well as the puzzling breakdown of the U.S. Beveridge curve that occurred during 2009.

Sasser, Alicia and Dennett, Julia, Are American Homeowners Locked into Their Houses? The Impact of Housing Market Conditions on State-to-State Migration (February 8, 2012). FRB of Boston Working Paper No. 12-1. Available at SSRN: http://ssrn.com/abstract=2125158 or http://dx.doi.org/10.2139/ssrn.2125158
U.S. policymakers are concerned that negative home equity arising from the severe housing market decline may be constraining geographic mobility and consequently serving as a factor in the nation’s persistently high unemployment rate. Indeed, the widespread drop in house prices since 2007 has increased the share of homeowners who are underwater on their mortgages. At the same time, migration across states and among homeowners has fallen sharply. Using a logistic regression framework to analyze data from the Internal Revenue Service on state-to-state migration between 2006 and 2009, the authors discover evidence that “house lock” decreases mobility but find it has a negligible impact on the national unemployment rate. A one-standard deviation increase in the share of underwater nonprime households in the origin state reduces the outflow of migrants from the origin to the destination state by 2.9 percent. When aggregated across the United States, this decrease in mobility reduces the national state-to-state migration rate by 0.05 percentage points, resulting in roughly 110,000 to 150,000 fewer individuals migrating across state lines in any given year. Assuming that all of these discouraged migrants were job-seekers who were previously unemployed before relocating and then found a job in their new state would reduce the nation’s unemployment rate by at most one-tenth of a percentage point in a given year. The cumulative effect over this period would yield an unemployment rate of 9.0 percent versus 9.3 percent in 2009. Recognizing that not all state-to-state migrants are job-seekers, not all job-seekers were previously unemployed, and not all previously unemployed job-seekers will successfully find work in their new location yields an unemployment rate that is virtually unchanged from the actual one that prevailed from 2006 to 2009.
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Re: Home Ownership May Actually Cause Unemployment (NY Times

Postby LadyGeek » Fri May 10, 2013 8:51 pm

This thread is off-topic and locked (not actionable). See: A reminder that non-investing general comment threads are OT

- It must be personal. In other words, you must be asking about your own situation. You can also ask on behalf of someone specific, such as a family member.

- It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation.
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