Holding Onto the Past: Previous Homes, Post-Move Housing Consumption, and the Great Recession

Abstract

We document that households relocated during the 2007-2009 Great Recession and its aftermath were substantially more likely to hold their previous homes for an extended period of time. We identify two contributing factors to this phenomenon. First, falling house prices pushed many homes into the “negative-equity” and “near-negative-equity” territories, and this made it challenging for owners to sell their homes. Second, we also show that falling home values had a more widespread effect that made all homeowners, regardless of their equity positions, more reluctant to sell. Additionally, we find households without mortgages are more likely to hold previous homes. Overall, we show the relationship between the loan-to-value (LTV) ratio and the likelihood of holding is U-shaped. We further examine the impact of holding previous homes on post-move housing tenure and housing consumption choices. We find that holding previous homes is associated with renting for a longer period. For households that bought new homes after relocation, holding previous homes is associated with the new residences that are less expensive and smaller. Our results suggest that, for households that moved during the housing bust, the Great Recession has a long-lasting effect on their housing consumption choices.