Home Ownership May Actually Cause Unemployment

[unrepentant progress]

When the Peterson Institute releases a study saying that home ownership is bad because it causes people to stay where they are (i.e. as stable members of their communities), I begin to think maybe home ownership really is a good idea.

At the simplest level, the authors of the study, released by the Peterson Institute of International Economics, point to the fact that the five states with the largest increase in homeownership from 1950 to 2010 — Alabama, Georgia, Mississippi, South Carolina and West Virginia — had a 2010 unemployment rate that was 6.3 percentage points higher than in 1950. The unemployment rates in the five states where homeownership went up the least — California, North Dakota, Oregon, Washington and Wisconsin — rose 3.5 percentage points during the period.

Such statistics are not persuasive by themselves, and the professors know it. Many factors obviously influence unemployment rates in any given state. North Dakota’s current boom stems from energy deposits, which would have been there no matter who owned the land.

But they say that the statistics show those patterns no matter how much they control for other variables and that the same picture emerges if they look at employment growth rather than unemployment rates. They say that the pattern existed before the crash of the housing market that began in 2007 and that the statistics are not dependent on including the more recent period.

<snip>

If the correlation is real, what could be the cause? 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.

http://www.nytimes.com/2013/05/10/business/homeownership-may-actually-cause-unemployment.html

[hobbit709]

1. and the next pile of BS will be?

[unrepentant progress]

3. "Homeownership, in economists’ jargon, creates “negative externalities” for the labor market."

I think that would be it right there. From later on in the same article.

[JDPriestly]

2. So, if the people who live in houses shouldn't own them, who should?

Corporations?

The rich?

Or the government?

Which of these do you suppose the Peterson Institute would pick?

What a nasty bunch, the Peterson Institute.

I would like to mention that home ownership and homeowner groups also cause communities, civilizations, schools, churches, hospitals, libraries and everything else that we need for a healthy society.

The word "Institute" should mean a place of learning, and the Peterson Institute should know that mathematical correlation is not causation.

Unemployment in areas in which people own their homes and obviously worked to earn the money to buy them is not due to the fact that the people own their homes but due to the fact that some greedy rich guy either bought out or undersold the stores and businesses that used to employ the homeowners and thus ruined the community.

What a greedy, awful bunch, the Peterson Institute.

[unrepentant progress]

4. Well, it's Peterson so we know the answer isn't C.

No council housing blocks for you! Unless you're talking about some kind of public-private money siphon.

[trof]

7. I think the point is that 'owning' a house ties you down.

Many of us never 'own' a house.
I'm 72 and this is the 5th house I've lived in.
Although I've 'bought' each one, I've never completely owned one and probably never will.
Like most folks , I have a mortgage.
Every time I've 'bought' a new house, I've kicked the mortgage down the road.
Usually a larger mortgage.
Always trading up as my family and financial circumstances grew.

There have been times that, due to financial setbacks, it's been tough to make the payments.
But I didn't want to walk away and lose the equity I had, so we scraped by and stayed.

In effect, this kept me anchored in one place, when I might have pursued employment elsewhere.

Just my 2 cents.

[ProSense]

12. That makes

"I think the point is that 'owning' a house ties you down."

....sense. It's an issue of mobility, but the way the OP is framed is that homeownership "causes" unemployment. False. Homeownership simply limits the options of those who become unemployed as a result the "causes" of unemployment: shipping jobs overseas, corporate greed, and Republican obstruction.

From the OP:

At the simplest level, the authors of the study, released by the Peterson Institute of International Economics, point to the fact that the five states with the largest increase in homeownership from 1950 to 2010 — Alabama, Georgia, Mississippi, South Carolina and West Virginia — had a 2010 unemployment rate that was 6.3 percentage points higher than in 1950. The unemployment rates in the five states where homeownership went up the least — California, North Dakota, Oregon, Washington and Wisconsin — rose 3.5 percentage points during the period.

Such statistics are not persuasive by themselves, and the professors know it...

That really seems like bullshit, and the "professors know it."

[unrepentant progress]

14. Yep. It's a common sense observation cloaked in a neoliberal agenda

Obviously owning a home means you're less mobile than a renter. However, they talk about it as a negative externality to the labor market. How inconvenient those people who put down their roots in a community that we can't exploit them at our leisure.

[XemaSab]

21. I also wonder how much cost of living and the existing economy play into it

A $40K house in Mississippi and a $400K house in California are going to be owned by people in entirely different communities, job markets, and socioeconomic classes, and those factors also feed into unemployment.

A 30-yo single mom with two kids who is an assistant manager at the Wal-Mart in Tupelo and a 30-yo single male with no kids who is a software engineer in San Jose are going to have entirely different employment prospects. Also, their risks of being unable to make payments and defaulting are different. There's a difference in willingness to walk away from the existing support networks as well as any equity sunk into the house. Finally, there's a difference in ability to move to a new community to find work.

If the single mom loses her job, she's probably better off staying in Tupelo and looking for a new job than she is moving to some other community and trying to find work there. If the single dude loses his job, he's more likely to be locally employable and he's not losing a huge chunk of wealth or any essential support structures in the community by moving.

[JDPriestly]

23. Do you enjoy a sense of community where you live in one place?

I do. I know my neighbors. We have shared our lives for many years. Today, we were sharing our avocados with families whose children we have watched grow up. That means something. Sharing with your neighbors. Watching their kids grow up.

After family, community is what gives a meaning to your life.

Community is an ancient concept. It is, just like the family, the core of civilization. Nothing is possible for us humans unless we live in communities.

And for most of us our community is defined by the area in which we sleep at night and eat our meals, where our closest friends and relatives are.

That is not the case for the very rich who can get in their private planes and commute from the coast of California to Boston, Mass. and all points between on a whim, or even travel anywhere in the world. They don't rely on the community in which they live like we do. So they don't understand how important a community of familiar places and faces is.

Having lived in a very small village in another country, I know that the concept of home and community is international. It is basic to human survival. That is why it is important for Americans to own homes.

And, again, the study by the Peterson Institute is full of it.

During the Depression, many people lost their homes. After WWII, the soldiers came home. Programs were in place to help them buy homes. That was a wonderful thing.
Homebuyers, the dream of owning a home, was something young families worked for. Their work made America strong and helped us grow as a country.

You point out that you sometimes did not "own" a home in the sense of having paid off the mortgage. I think that when we say we "own" a home, we mean we have equity or at least some interest in the house.

In a normal housing market with people employed, there is no problem in selling a home you "own."

This Peterson study is completely absurd. In normal times, people are not tied to a job or place because they own a home.

The current unemployment and the sub-prime mortgage crisis has made it difficult for people to sell their houses and move. If jobs were plentiful and the economy was good, people would happily move from one house to another. The norm used to be to keep a job and stay there for many years. It is the corporations who have ruined that model, not homeowners.

I have no patience with the idiots at the Peterson Institute. They cannot think logically. They are ideologically driven to the point of ignoring obvious factors and reaching false conclusions. They are not to be trusted.

[unrepentant progress]

27. +1000

[FarCenter]

5. A community full of unemployed, underwater homeowners is not stable

One problem with homeownership is the roughly 8% cost of doing a sale.

Which means that it costs $24,000 to sell a $300,000 house in one community and buy one in another.

One solution would be to reduce realtor's fees, mortgage fees, taxes, etc. so that it only cost 1 or 2% to do a real estate transaction. That would make it more feasible for people to move to where the jobs are.

[Honeycombe8]

6. Realtor's fees. But people are entitled to make a living for their work.

They work on commission, not guaranteed wages. They don't have benefits. I'd hate to see the govt step in to prevent a group of workers from charging what the market will bear. It's been the same percentage for eons. So their commissions go down in a recession and go up in good times.

Taxes? You're a Democrat. Taxes pay for all the things we want the govt to pay for. So forget that.

Mortgage fees? I'll agree with you on that one. It's a rip off.

[trof]

8. Good luck with that.

[Purplehazed]

10. How should realtor's....

fees be reduced? Government mandate? There is no requirement for realtors to be involved in the sale of a house.

[FarCenter]

22. Break up the National Association of Realtors monopoly

[BOG PERSON]

9. i hope everybody at the Peterson Institute ends up living out of their car

that'll keep them motivated

[Benton D Struckcheon]

26. Ha! Reminds me of a column way back when in the Village Voice,

where the author said that if your kid showed signs of being a Republican, leave him/her out in the rain one bad night, don't let the spoiled brat back in. That'll learn em. (Meant in jest of course, before someone actually tries this...)

[zbdent]

11. I was told by "right-thinking" individuals that it was the fact that

women choose to be in the workforce, instead of being constantly pregnant and at home raising babies, thus taking jobs away from the men ... (and emasculating them in the process ...)

[unrepentant progress]

13. Ah, another negative externality on the labor market

Clearly we must eliminate all labor market negative externalities, then we shall have perfect slaves, er, I mean employees.

[duffyduff]

15. Take anything associated with the scumbag Peter J. Peterson with a huge grain of salt.

Here is the scumbag's "report":

http://www.iie.com/publications/wp/wp13-3.pdf

[unrepentant progress]

16. Do I have to?

I'd rather just dig a pit, and bury it in lye.

[duffyduff]

17. Good one. n/t

[pa28]

18. Interesting to note the reasons they CHOSE to cite.

They conveniently ignored the idea that areas with high rates of home ownership might also have high rates of stable union jobs and be populated by members of the former middle class. Also conveniently ignored is the fact that high paying jobs are being re-located to labor unfriendly states or being offshored altogether.

They are fingering a symptom of the problem as a root cause. I'm detecting the distinct odor of lavishly funded Reinhart-Rogoff style bullshit here.

[gejohnston]

19. corrolations are usually coincidences

or two things that occur together but not cause and effect. That is why it is a logical fallacy. See post hoc ergo propter hoc.

[KentuckyWoman]

20. Well duh

It's kinda hard to sell my home for less than half of what I paid for it over 30 years ago so I can move to India or China where all the jobs are.

But I don't think you can blame all that on the fact I bought a house instead of renting.

Now if you want to blame me for wrongly thinking the job creators who expect loyalty from their American workers would reward American workers for the loyalty then yeah. We can have that conversation.

[unrepentant progress]

25. +1!

[Liberal_in_LA]

24. what ?

[geek tragedy]

28. Pete Peterson wants people to be serfs living on the estates

of corporate landlords.