underwater homeowners may swim freely

http://www.nationofchange.org/underwater-homeowners-may-swim-freely-1326299497

Pre­vail­ing wis­dom has it that home­own­ers who owe more on their mort­gages than their houses are worth -- known as being "un­der­wa­ter" -- are forced to stay put be­cause the prop­erty is too dif­fi­cult to sell. So peo­ple who would oth­er­wise re­lo­cate -- say, to find a job -- are "teth­ered to their homes." It's a the­ory touted by promi­nent New York Times colum­nist Thomas Fried­man, Har­vard econ­o­mist Lawrence Katz, and reg­u­larly makes ap­pear­ances in the media.

But ac­cord­ing to econ­o­mist Sam Schul­hofer-Wohl at the Fed­eral Re­serve Bank of Min­neapo­lis, they've all got it back­wards: un­der­wa­ter home­own­ers are ac­tu­ally more likely to move.

In a forth­com­ing paper, he ar­gues that the main source of em­pir­i­cal ev­i­dence for the es­tab­lished view is flawed, be­cause it ig­nores a sub­stan­tial num­ber of movers.

Ev­i­dence for the teth­ered-to-their-homes the­sis comes largely out of a paper from the Na­tional Bu­reau of Eco­nom­ics Re­search (NBER) whose au­thors hail from the Whar­ton School of the Uni­ver­sity of Penn­syl­va­nia and the Fed­eral Re­serve Bank of New York. The paper an­a­lyzed a na­tional sam­ple of homes by U.S. Cen­sus Bu­reau called the Amer­i­can Hous­ing Sur­vey. Since 1985, Cen­sus Bu­reau in­ter­view­ers have tracked over 60,000 hous­ing units across the coun­try, re­turn­ing every two years to record who lives there. If the Cen­sus records a house as oc­cu­pied by its owner, then two years later there are four pos­si­bil­i­ties: the house is oc­cu­pied by the same owner, a dif­fer­ent owner, a renter, or no­body (the house is va­cant.)



*** status quo economists get it wrong AGAIN -- and my guess is they won't be fired -- which they should be.