Homeownership Increases Unemployment Rates

Homeownership Increases Unemployment Rates

November 21, 2013 | Rental Trends, Rental Trends and Real Estate News

A big part of the quintessential American Dream has historically included owning a home where a person can raise a family (white picket fence or not). However, a recent study done by Dartmouth College in New Hampshire and the U.K.’s University of Warwick suggests that homeownership actually contributes to high unemployment rates. If that is the case, Americans may want to reconsider their housing choices.

Research Findings

Researchers took a look at homeownership data in the U.S. from 1900 to 2010 and compared the information to data on millions of randomly sampled Americans. They found a strong connection between homeownership and prevalence of unemployment. Not only that, but increases in the number of people owning homes actually stifled economic growth.

Lack of Mobility

Renters can easily be mobile because they are not financially glued to a home. When a new job offer comes from out of town or even out of state, they can pack up and leave. There may be a small fee attached to breaking a lease, but it’s not nearly as inconvenient as the hassle of selling a house. Homeowners, on the other hand, don’t have that kind of mobility. When they lose a job, they have to keep looking in the same area, where the same market that ended their employment exists. Rather than leave town, unemployed homeowners must stay in the house they probably can’t afford and look for a job in an area that may not have any.

Commuting Times

The prospect of facing a long commute works in a similar way. Unemployment rates are high when a person cannot take a job because it is too far away. Not only can homeowners not move to find work, but they also narrow down their search field by looking for jobs with a short commute. A house acts as an anchor, keeping unemployed homeowners in place. In contrast, renters can find a new apartment once their lease is up that will cut down their travel time. In fact, many renters look for their place with the criteria that it is close to work. When they lose a job, they don’t have to stress over finding an office close to home.

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