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Commentary Does Homeownership Cause Unemployment

first_imgCommentary: Does Homeownership Cause Unemployment? Agents & Brokers Attorneys & Title Companies Home Values Investors Jobs Lenders & Servicers Mark Lieberman Payrolls Service Providers Unemployment Valuation 2013-06-07 Mark Lieberman Can the drop in homeownership be good news?When President George W. Bush followed his predecessor Bill Clinton in pushing homeownership, one loud dissenter was British economist Andrew Oswald, who argued that far from improving the economy–as Bush (and Clinton before him) said it would–homeownership hurts the economy in the long run.[IMAGE]Oswald produced data to show that every 5 percent rise in homeownership results in a 1-percentage point increase in the unemployment rate. Oswald made his case using state-by-state data, ignoring the fact that as homeownership was increasing nationally, the unemployment rate was falling.As the economy began to turn, crushed by the housing bubble, challenges to homeownership started to gain support. Underwater homeowners in states with high unemployment rates, the argument went, were trapped: They couldn’t sell their homes and therefore couldn’t relocate to states with lower unemployment rates.Now, Oswald and Dartmouth Economics Professor David Blanchflower are at it again in a new paper released by the National Bureau of Economic Research with arguments even they admit may be shallow. Homeownership, they say in their new paper, “”leads to three problems: lower levels of labor mobility, greater commuting times, and fewer new businesses.””Their findings don’t seem to line up with a study by “” and Economic Modeling Specialists,””: which saw a positive relationship between housing and the job market.In their study, Blanchflower and Oswald try to show not the impact of employment or unemployment on other aspects of parts of the economy but rather the impact of those “”externalities”” on unemployment.””Unemployment,”” they wrote, “”is a major source of unhappiness, mental ill-health, and lost income. Yet after a century of economic research on the topic, the determinants of the equilibrium or ‘natural’ rate of unemployment are still imperfectly understood.””So, they tried to look at the topic from the outside in.””Our study,”” they said, “”provides evidence consistent with the view that the housing market plays a fundamental role as a determinant of the rate of unemployment.””Using data on two million randomly sampled Americans, they built models estimating the number of weeks worked, the extent of labor mobility, the length of commuting times, and the number of businesses and reached four conclusions:* A “”strong statistical link between high levels of home-ownership in a geographical area and high later levels of joblessness in that area.””* High homeownership areas have lower labor mobility.* States with higher rates of homeownership have longer commute times.* States with higher rates of homeownership have lower rates of business formation.Though their “”conclusions”” may come from a “”statistical link,”” they offer little evidence to suggest any causation between the sets of numbers.Indeed, they seem to undermine their own findings, acknowledging that the “”link”” between homeownership and unemployment could take as long as five years to develop, during which time other factors may have affected both homeownership and employment.They acknowledge too they “”are unable, in this paper, to say exactly why, or to give a complete explanation for the [lower labor mobility] patterns.””Longer commute times, they say, result from greater congestion resulting from increased construction of both homes and businesses, but that would also mean more–not fewer–jobs.The congestion could just as easily be the consequence of increased construction, which would serve to expand, not contract, the labor market.The lower rate of business foundation, they suggest, “”might be the result of zoning restrictions and NIMBY [not in my backyard] effects … that are rational for homeowners,”” but then they add, “”that channel can be only a conjecture.””In their paper, Oswald and Blanchflower actually dismiss the argument that when the housing bubble collapsed, underwater homeowners were trapped in their homes.””A number of researchers later examined micro data,”” they wrote. “”The ensuing literature concluded that the bulk of the evidence is against the idea that home-owning individuals are unemployed more than renters.””To their credit, Blanchflower and Oswald acknowledge the possibility of flaws in their study.””Our analysis has a number of important weaknesses,”” they said. “”We are unable to assess the effect of exogenous changes in the structure of the housing market. We have had to rely, instead, upon an examination of the lagged pattern of unemployment observed a number of years after a movement in a state’s rate of homeownership. … This is potentially a weakness and means that some underlying omitted variable, or causal force, might be responsible for the link between [homeownership] and [unemployment]. That would not make the patterns in this paper uninteresting ones, but it would mean that a key variable is missing from the analysis.””A couple of months ago, the economics profession was rocked by a controversy over a paper written by Harvard professors Carmen Reinhart and Kenneth Rogoff, who left key variables out of a study that purported to show that heavy national debt burdens lead to slow growth and even negative growth. On the basis of their study, Reinhart and Rogoff said the United States, a nation deeply in debt, should undertake severe spending cuts. Fortunately, Blanchflower and Oswald stopped short of any policy recommendations in their paper. _Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) on Friday at 6:20 a.m. Eastern._*_Want to write an opinion piece for publication on our site? Send your submission to_* “”[email protected]””:mailto:[email protected] in Governmentlast_img read more


Home Prices Up 45 Percent YearOverYear

first_imgHome Prices Up 4.5 Percent Year-Over-Year February 23, 2015 452 Views in Daily Dose, Data, Featured, News In a familiar theme amid the national housing market, U.S. home prices are down a little for one month, but still doing better than they were a year prior.Black Knight Financial Services released its latest Home Price Index Report Monday, which showed that home prices nationwide were down an almost-flat 0.1 percent in December. At the same time, 2014 ended with sale prices doing 4.5 percent better than a year prior.According to the report, the average home sale price in the U.S. in December was $241,000, up from $230,000 a year before and inching closer to the June 2006 peak of $268,000.Several states, despite the dip, showed average price gains. New York and Colorado each showed a half-percent uptick in sale prices, while Oregon, Florida, Oklahoma, and Arizona each saw prices rise by 0.3 percent. Arkansas, Georgia, Wyoming, and Idaho rounded out a set of states seeing climbs in sale prices.However, while recovery continues, Arizona and Florida still remain about 30 percent off their pre-crisis peaks, Black Knight reported.On the other end of the spectrum, the Northeast and Midwest showed the most notable price drops in December. Michigan and Connecticut each saw average sale prices that month drop by more than a percent, while Vermont saw a nearly 1 percent decline. New Hampshire, Pennsylvania, and Rhode Island were down by roughly a half-percent in December, as were Illinois, Minnesota, Wisconsin, and Missouri.In major metros, Denver, New York, and Dallas showed rising home price sales in December ‒‒ 0.7, 0.5, and 0.1 percent, respectively. Los Angeles was flat, while Chicago and Washington, D.C., each reported dips above 0.2 percent. Detroit reported a 1.2 percent decline.Some smaller metros in Florida and Colorado, however, showed solid increases in average sale prices in December. Cape Coral, Florida, was up almost a full percent, while several other metros in both states showed at least a half-percent rise in sale prices.Like the major metros, small metros in the Northeast showed the largest sale price drops. Connecticut reported the most metros of any state to see drops, with declines in Torrington, Bridgeport, Norwich, Hartford, and New Haven. New Haven, in fact, showed the biggest metro decline in the U.S., with a 1.5 percent drop in sale prices. Atlantic City and Trenton, New Jersey; Ann Arbor, Michigan; and Santa Rosa, California, also reported nearly 1 percent declines.center_img Black Knight Financial Services Home Price Index Home Prices 2015-02-23 Scott_Morgan Sharelast_img read more