Abstract

AbstractThis chapter investigates the impact of negative home equity on job mobility. Panel fixed-effects estimation is carried out by making use of a Dutch administrative data set for the period 2006–2011. Endogeneity of home equity is taken into account by considering homeowners who fall underwater because of an exogenous price decline. They are compared with homeowners with positive home equity. Negative home equity has a moderate negative effect on the probability of changing jobs. If a household plunges into negative home equity, the head of the household is about 5.2% less likely to change jobs.

Highlights

  • During the recent global financial crisis (2007–2009), the large decline in house prices led many homeowners into negative home equity (NHE)

  • This study investigated the effect of NHE status on job-to-job mobility

  • Households that plunge into NHE involuntary as a result of an unforeseen fall in house prices are 5.2% less likely to change jobs than households remaining with PHE

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Summary

Introduction

During the recent global financial crisis (2007–2009), the large decline in house prices led many homeowners into negative home equity (NHE). It has been suggested that the large increase in NHE hindered the mobility of workers and had negative consequences on the labour market (Stiglitz 2009; Krugman 2010; Katz 2014). The increase in the proportion of homeowner households with NHE was high in the Netherlands. It increased from less than 10% to more than 20% in the period 2006–2011. This increase was especially due to homeowners who fell into NHE as a result of the unexpected decline in house prices

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