Demyanyk, Yuliya Hryshko, Dmytro Luengo-Prado, María José Sørensen, Bent E.
Year of Publication:
Working Papers, Federal Reserve Bank of Boston 16-1
Using individual-level credit reports merged with loan-level mortgage data, we estimate how mobility relates to home equity when labor markets are weak or strong. We control for constant individual-specific traits with fixed effects and find that homeowners with negative home equity move to other metropolitan areas more than other homeowners. We use a dynamic quantitative model of consumption, housing, employment, and mobility to interpret our findings. The model illustrates that the gain from accepting a job in another area outweighs the cost of disposing of underwater property and replicates the data well.