10 ms·

Economists: Home ownership leads to unemployment

79 points by soundsop 13y ago

k-mcgrady 13y ago
Very interesting. I'd like to see how this applies in other countries, particularly smaller ones. For example, where I'm from most people wouldn't commute more than 60 mins for a job. However it is possible to commute from one side of the country to a job at the other side in under 3 hours. I would presume therefore that the loss of mobility caused by home ownership wouldn't affect the labour market as much in smaller countries.
- salmonellaeater 13y ago
  By that logic, every US state could close its borders (if such a thing were possible) and cut down unemployment. Maybe the effect on unemployment from home ownership is smaller in small countries, but the fact that it's a small country has other, worse, effects on its economy.
wtvanhest 13y ago
I don't own a home, and don't advocate owning one for anyone who is younger and needs to move to find great employment, but a HUGE potential error jumped out at me right away. Home ownership accelerates in markets which are more leveraged to housing. Take Florida for example. Many people who live there work in various real estate jobs, when prices start to rise, they rise much more rapidly by percentage, and they fall much more rapidly. If the majority of a state's high paying jobs are in real estate, more people will be jobless following boom and bust cycles. Additionally, more people will be getting raises, high commission checks etc. which leads to greater home ownership in those states. Without knowing if the author of the paper took this in to account, the research is completely worthless. Cyclicality in finance is a constant major issue and should be examined not only systematically, but also by asset class, area etc. Cyclicality usually explains a very great degree of issues with research. [added] A second potential explanation is that the 3 best markets for jobs have the highest prices on houses which prevents people from buying. New York, San Fran, Boston. Obviously California would go against my previous explanation.
- pessimizer 13y ago
  Are you criticizing a paper you have never read because of its ignoring of a facet of a possible dataset that you are not certain they have used and admittedly have no idea that if they used it, that facet was ignored?
  - Zarathust 13y ago
    To be fair, most of the comments here are merely conjectures about what the paper might say
    - wtvanhest 13y ago
      I can't read it due to the pay wall so I must comment only on what is available.
manicdee 13y ago
Which state was cherry-picked for this study? Did they control for other influences on labour mobility such as working couples, children, pets, race/colour and car ownership?
- deleted 13y ago
  [deleted]
- DanBC 13y ago
  (https://news.ycombinator.com/item?id=5823345 https://news.ycombinator.com/item?id=5823345) A web search for some sentences in the abstract returns some useful hits for the paper online. Someone else posted (after you had posted) a link to the full paper. Here's a nice PDF. (http://www.piie.com/publications/wp/wp13-3.pdf http://www.piie.com/publications/wp/wp13-3.pdf)
taliesinb 13y ago
Though I'm not a singularitarian, I do think we are probably going to live an order of magnitude longer than our parents. Given that, buying a house seems too... parochial.
- gmrple 13y ago
  You think we're going to be living into our 800s?
  - huherto 13y ago
    No, he thinks our parents only lived 8 years.
  - gojomo 13y ago
    Perhaps he means 'order of magnitude' in base e. Or 2. Or even phi.
  - scarmig 13y ago
    I thought about this and I can construct some logic to support his phrasing. Suppose we figure out how to end aging, but people continue to die at the same mortality rate as the 25-34 year old group. That's roughly 1/1000 per year. (999/1000)^692 = 0.5 If we could nudge that mortality rate down a bit, 800 seems like a pretty good ballpark estimate.
  - gte910h 13y ago
    Apparently actuarial tables put us at about 600 w/o aging (accidents, etc)
- learc83 13y ago
  You think we're going to live 10x longer than our parents, but without some kind of singularity/mind-in-a-computer thing? So you think we're biologically going to live to ~800?
  - chopsueyar 13y ago
    I seent it... http://en.wikipedia.org/wiki/Kill_Switch_%28The_X-Files%29 http://en.wikipedia.org/wiki/Kill_Switch_%28The_X-Files%29
saosebastiao 13y ago
Can we please get rid of the mortgage tax deduction now?
- mynegation 13y ago
  Why? I know many Canadians would kill for mortgage interest tax deduction.
  - jfb 13y ago
    From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally; and it distorts the housing market in dangerous and destructive ways. Aside from employer sponsored health insurance, it's the most pernicious bit of Federal social engineering.
    - mynegation 13y ago
      Thank you for your answer. On one hand, corporations get tax breaks on debt interest, even in Canada, so why should not people? On the other hand I believe that corporations are way more rational than people in taking on debt. For most people buying a house is not an investment, but very emotional decision, and I see how tax incentive may put more steam into bubbles.
      - gaadd33 13y ago
        But personal bankruptcy still carries somewhat of a social stigma whereas corporate bankruptcy is part of a good business plan.
      - drpgq 13y ago
        In Canada you get an exemption for capital gains on your principal residence, which is a pretty big tax break already.
    - AnthonyMouse 13y ago
      >From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally If it makes you feel any better, the home owner in reality gets practically none of the money. Since everybody gets the deduction it just causes everyone to have to bid that much more in order to be the highest offer. And the higher prices don't really spur new home construction to compensate as you might expect, because the areas with high demand are largely urban areas with minimal available undeveloped land and zoning regulations that often prohibit the construction of higher density housing that would relieve pricing pressure. The result is that the big winners are banks, which end up making larger loans and collecting that much more government-subsidized interest.
nhashem 13y ago
As a resident of Los Angeles, this seems anecdotally (which has the usual caveats) obvious to me. I saw home ownership lead to issues with employment within the Los Angeles metropolitan area. There is a lot of "affordable" ($400K to $600K) single family homes in the San Fernando Valley, or towards Orange County, so I had a lot of coworkers buy homes in those areas. If you work in Venice, a house in Torrance is about a 45 minute commute by car. I know this will sound absurd to a lot of people in HN, but if you told a Los Angelan your commute to work was 45 minutes each way, they would say "that's pretty good." However, if you bought a home in Torrance and live there and a company in downtown LA wants to hire you, even though you're only driving about another 8 miles or so, your commute will probably explode close to an hour and a half, and at least one day a week there'll be some clsuterfuck of an accident on one of the freeways, and you'll have the lovely experience of leaving your house at 8:00am and somehow still being late to your 10:00am stand-up meeting. Fun times! So I saw home ownership cause former coworkers limit their economic mobility to within one section of one city. For them, it was an option to simply wait until a desirable job opened up in the areas with a bad-but-not-intolerable commute, or they were able to mitigate commutes by negotiating flexible hours with their employers (e.g. working 7am to 3pm, or 11am to 8pm, or only coming in 2-3 days a week, etc). I recognize Los Angeles' traffic is about as bad as it gets as far as a home ownership "anchoring" someone, but if home ownership causes a reduction in mobility for professionals in a high-earning and high-demand field, I can only imagine the kind of impact it has on the rest of America.
- melling 13y ago
  Venice to Torrance is about 20 miles? Commuting great distances of 20-30 miles to work will hopefully be solved sometime in the latter half of the 21st century. I don't think most people in America suffer in quite the same way. Ok, the NYC area can be that bad but most people use mass transit. Maybe there's room to make the roads even wider in CA? Seriously, the problem is self-inflicted and was easily avoidable with some better urban planning 4-5 decades ago.
  - pchristensen 13y ago
    s/urban planning/less restrictive zoning/ LA has great transportation bones and layouts (http://www.humantransit.org/2010/03/los-angeles-the-transit-metropolis.html http://www.humantransit.org/2010/03/los-angeles-the-transit-...), but it cannot densify, so it's stuck at a bad level of too dense for cars to work well but not dense enough to be primarily transit based. Metro LA is denser than metro Boston, SF, or Chicago.
KevinEldon 13y ago
Don't miss Philip's point, "let’s always keep in mind that John Ioannidis would predict that a subsequent paper will find a different answer". Anecdotally, my father has a pretty specialized job and got burned repeatedly in the housing market as he moved around for work. In his case it probably would have been a lot better for him if he'd rented almost every home he ever owned. In my case, I'm settling down with my family, friends, and extended family. I do not intend to move for another 20-30 years regardless of work. I think people should take this view seriously... if you want to stay where you are for 30 years and are willing do that despite potentially limited career (and financial) opportunities then owning a home makes sense (and managing your finances to enable this kind of lifestyle makes even more sense). If you want to pursue "the best" work or are concerned about financial security from employment you should consider not buying a home so you can remain flexible. I obviously haven't read the paper, but the idea of home ownership negatively affecting employment is interesting.
- huherto 13y ago
  This calculator helps you decide if it is better to buy or rent. http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0 http://www.nytimes.com/interactive/business/buy-rent-calcula... As you pointed it out, a key factor is how long you are going to remain in the house.
  - ndonnellan 13y ago
    I stumbled upon that calculator after writing one of my own one afternoon; it's cool! Another key factor: house price appreciation and your ROI of capital. If house prices (adj. for inflation) don't rise much (as last 100 yrs or even 40 have shown) and you can make several percentage points above inflation on investing what you would have put into a down-payment, it doesn't matter how long you live in the home. It's all in what kinda SWAGs you make. The default values in the NYtimes calculator are 1100/mo equiv. for $172k, but based on price to rent ratios here in Austin (near 20? http://www.deptofnumbers.com/affordability/texas/austin/ http://www.deptofnumbers.com/affordability/texas/austin/) that home price would be near $250k
  - secabeen 13y ago
tocomment 13y ago
By this argument shouldn't marriage also lead to unemployment since you have to live near your spouses job as well and often can't relocate.
- saosebastiao 13y ago
  Children are a larger determinant of labor immobility. http://www.appstate.edu/~cherrytl/papers/family_ties.pdf http://www.appstate.edu/~cherrytl/papers/family_ties.pdf
- mynegation 13y ago
  And it probably does. In many situations when one spouse has to move frequently for work or there is no liquid job market (e.g. military, postdocs, medical residents), another spouse find themselves unemployed or need a significant time before finding work which also contributes to unemployment numbers.
- rfugger 13y ago
  Yes, human relationships are a real drag on the economy.
  - gordaco 13y ago
    And, more importantly: the other way around.
- giardini 13y ago
  Of course. And by extension, note that any factor that constrains your choice of jobs will "lead to unemployment". This is, in essence, a trivial argument and no one should be surprised. The more interesting argument is that the government has promoted home ownership and home loans for decades. And once again the involvement of government leads to suboptimization.
mbateman 13y ago
The paper: http://www.andrewoswald.com/docs/finalmayHomeOwnershipUnemBlanchflowerOswald2013.pdf http://www.andrewoswald.com/docs/finalmayHomeOwnershipUnemBl...
frozenport 13y ago
What about construction jobs that aren't permanent?
obstacle1 13y ago
The paper actually is available for free online [1]. Someone better let Phil know about Google Scholar. [1] - http://www.feifeishi.iie.com/publications/wp/wp13-3.pdf http://www.feifeishi.iie.com/publications/wp/wp13-3.pdf
- jpdoctor 13y ago
  Look at Figure 2 on pg 17. Does anyone really want to draw conclusions on homeownership and unemployment based on that data?
midas 13y ago
I find our community desire towards home ownership to be really strange. For example, we all need to eat food everyday for the rest of our lives, but you almost never hear society bemoaning how few people own their own means to produce food! We seem perfectly happy to pay for what we use (i.e. rent) instead of investing in production (i.e. own). If you know you're going to live somewhere for 20 years it usually makes a lot of sense to own, but I don't know why we ascribe that aspiration to all our real estate needs.
- AJ007 13y ago
  It makes a lot of sense in retrospect. People want to own homes because #1 they believe it is a status symbol and #2 they believe the value will go up. Remove either and it wouldn't be so hot. Fractional reserve lending and economic policies toward price inflation have punished renters for a long time. Try convincing someone who thinks home ownership is a good deal that it isn't. I've never succeeded.
  - greenyoda 13y ago
    There are many other reasons why people might want to own homes: - Even if the value doesn't go up, eventually you'll pay off your mortgage and be able to live more cheaply. If you rent, you'll be paying rent (which will probably be steadily increasing) forever. If there's inflation, your fixed mortgage payment becomes smaller and smaller in real dollars over time. And while you're paying your mortgage, you get to deduct the interest from your taxes. - If you own your home, you can't be suddenly thrown out because the landlord wants to demolish the building, or raises the rent to more than you can afford (e.g., due to the gentrification of the neighborhood). - In some areas, owning a home can give you access to better school districts. - Detached houses have more space and privacy than apartments. You're less likely to be disturbed by your neighbors, etc. - A home that you own is yours to do with as you please. Want to put a pool in the backyard? Sure. Want to remodel the kitchen? Just call a contractor. Want to convert your garage to an office? That's OK. Want to rent out your house while you go on vacation? There's nobody you need to ask for approval.
    - 13y ago
moocow01 13y ago
I have to wonder though if in aggregate if a predominantly rent based society will lead to even more wealth disparity. While the housing bubble was not exactly the epitome of economic health, we've seen what has happened in the bay area recently. For most bay area tech workers there has been a substantial rise in employability and wages but on the other hand a significant portion on average of the individual economic gains typically have been funneled to increased rent that seems to go up 10-15% every year out here. Heck we even see this in North Dakota with the new oil jobs - the rent for a place in the middle of nowhere has skyrocketed. I guess the point being that Im unsure that low unemployment and mobility strongly correspond to more accumulated wealth for employees.
- kqr2 13y ago
  The solution is to build more houses. Right now homeowners have an incentive to keep housing stock low (cf. NIMBY). If more people were renters, there would be more of an economic incentive for more affordable housing.
- bsims 13y ago
  I spend quite a bit of time analyzing lending data and personal finances. I've also observed that when comparing a group of loans, those with homes were almost as likely to default on a loan as those without homes and it had minimal impact despite most people assuming that having a home makes a person "more stable." I have definitely seen many situations where a home becomes the priority over life, family and personal finances as well. On the flip side, this argument also assumes that if consumers get better jobs, make more money, etc. that they'll actually save and/or invest more and the unfortunate reality is that most people just tend to increase their rate of consumption proportionately to their income/bonus increase. So the nature of having a forced savings plan through a mortgage payment requires them to put money away yet still limiting their ability to move or take better positions.
avdempsey 13y ago
It sounds like a straightforward premise: if you're glued to one spot you're eligible for fewer jobs. I wouldn't discount that, except there will be an upside as well: an area with lots of homes might be a good place for more businesses. The question would be which factor has a greater effect? And unfortunately we don't know what the rest of the article says. That's a pity, because we can't see how they account for the giant freaking housing bubble the US had that immediately preceded an epic crash in the economy.
- kijin 13y ago
  > an area with lots of homes might be a good place for more businesses That will be true even if the people who live in those homes are only renting. People need stuff, therefore stuff sells well where there are lots of people. Homeowners need just as much toilet paper as renters do. Of course, if your business caters to people who extensively modify their homes, you might do better in a neighborhood of homeowners than in a neighborhood of renters. But the DIY home improvement industry only accounts for a small fraction of the total business opportunities that a neighborhood offers.
burritocop 13y ago
Buying a house ruined my life. I bought a house with my savings after the collapse. Got it really cheap (no mortgage). Only problem is now I want to sell it but can't. There are no jobs around here. I do have a crappy job. I could probably do better if I could afford to move away. I've considered just abandoning the property or selling it for basically nothing. Buying sucks. As does renting. I've seriously considered van life. http://cheaprvlivingblog.com/ http://cheaprvlivingblog.com/
- gaadd33 13y ago
  Why not rent it? If you got it really cheap just rent it for the cost of the property taxes.
  - burritocop 13y ago
    Renting includes a number of financial and legal responsibilities. Bad tenants can be a nightmare. I don't really want to risk having to deal with that drama. Right now I'm thinking I'll just have to sell the house at a loss. Not really so bad. It won't be a tremendous loss and I have lived in 3 years. I guess in the end it would have been the same had I just rented. Previous to this I did rent for a long time and hated that. I really am serious about the van thing.
    - gnoway 13y ago
      Have you looked into working with a property manager? They do all the screening and tenant management stuff for you. You give them a fixed percentage of the rent and I guess you're the wallet for repairs, etc. Unless their take of the expected rent would result in a negative cash flow for you, it seems like a better option than selling at a loss.
greghinch 13y ago
There's a number of other factors that usually coincide with home ownership that would produce the same effects, chiefly domestic partnership and children. The problem seems to be more that the increase in necessity of labor mobility has far outpaced the progression of transportation. Public transit in most of the US is a bad joke. And high speed transit is all but non-existent. I don't really have any idea how we reduce the car-culture, but that seems to be the root of the problem, not home ownership.
foobarian 13y ago
Hear, hear. How dare the serfs even think about owning their own home. They should be grateful to the merciful overlords for the opportunity to rent crappy overpriced and cramped housing where they can't nail things to the wall or have a dog. Not to mention the ever present threat of eviction by sale. That's what popped into my head when I read that post. But I lived in Cambridge, MA long enough to have a chip or two on my shoulder. :-)
jleyank 13y ago
I was told this and I tell others: If you have to move to take a new job, don't buy. If, however, you can reasonably map a career (or, say, 10 years of it) without moving, the system is set up to reward home ownership (particularly for US-ians I think). It's not an investment, although it has aspects of one. It's not a boat anchor either, but can serve as a good approximation in down times. Just be #!*&% careful when committing serious coin to the man.
miles 13y ago
The NYT article linked to in the comments section has much more detail: Challenge to Dogma on Owning a Home http://www.nytimes.com/2013/05/10/business/homeownership-may-actually-cause-unemployment.html?pagewanted=all&_r=0 http://www.nytimes.com/2013/05/10/business/homeownership-may...
johnvschmitt 13y ago
Hmm... It seems the major factor is simply overbuilding. "Overbuilding in one year leads to lack of building in subsequent years". As building homes is a big cause of temporary job growth. Also, I doubt long commutes lead to higher unemployment rates, as the economic pressures would step in. Companies hire to meet consumer demand. If they need workers, they'll raise wages, or open satellite offices where the workers are. They don't just stop hiring & let their production go down when they have orders.
31reasons 13y ago
The solution is very simple: Remote Work. I hope research like this one help make remote work be seen as a positive force in overall well being of the country. It saves Time, Energy and Gives More Opportunities and so Reduces Unemployment. It think its a great deal. I hope government can give some incentives to businesses for hiring remote workers by lowering employment tax.
gordaco 13y ago
I haven't read the paper, but I'm from Spain and I've seen several things that support the hypothesis. 1) Home ownership ties you to a geographical location. If you're renting you have more freedom to move, and increased mobility leads to less unemployment. This is the most obvious reason, but not the only one. 2) If mortgages take away a big enough portion of the paycheck, consumers have on average less money to spend in another things, and lack of demand can cripple the economy, while banks leech all the money ("extractive elites"). If rent was more prevalent, it would be easier to move to a more affordable house from time to time, driving down home prices (it would be kind of a "less captive" market; I'm not sure if that makes as much sense as I think). 3) The prevalence of mortgages gives employers a lot of leverage. If you're in serious debt, you're more likely to accept worse condition on your current job, because you can't afford to miss a payment (miss enough payments and you lose your house but keep your debt). Maybe it's a cultural thing, but this is a very real thing here in Spain. The effect is that employers can force worse conditions (especially lower salaries) on employees, which, again, creates a lack of demand because people don't have money to spend. Even worse, once you hit certain level of unemployment (which nevertheless was very high in Spain to begin with), it affects you even if you don't have a mortgage, because there is a huge amount of people willing to work for peanuts, driving salaries down for everyone and creating a feedback that reinforces the whole process.

79 points by soundsop 13y ago

Very interesting. I'd like to see how this applies in other countries, particularly smaller ones. For example, where I'm from most people wouldn't commute more than 60 mins for a job. However it is possible to commute from one side of the country to a job at the other side in under 3 hours. I would presume therefore that the loss of mobility caused by home ownership wouldn't affect the labour market as much in smaller countries.

salmonellaeater 13y ago
By that logic, every US state could close its borders (if such a thing were possible) and cut down unemployment. Maybe the effect on unemployment from home ownership is smaller in small countries, but the fact that it's a small country has other, worse, effects on its economy.

wtvanhest 13y ago

I don't own a home, and don't advocate owning one for anyone who is younger and needs to move to find great employment, but a HUGE potential error jumped out at me right away. Home ownership accelerates in markets which are more leveraged to housing. Take Florida for example. Many people who live there work in various real estate jobs, when prices start to rise, they rise much more rapidly by percentage, and they fall much more rapidly. If the majority of a state's high paying jobs are in real estate, more people will be jobless following boom and bust cycles. Additionally, more people will be getting raises, high commission checks etc. which leads to greater home ownership in those states. Without knowing if the author of the paper took this in to account, the research is completely worthless. Cyclicality in finance is a constant major issue and should be examined not only systematically, but also by asset class, area etc. Cyclicality usually explains a very great degree of issues with research. [added] A second potential explanation is that the 3 best markets for jobs have the highest prices on houses which prevents people from buying. New York, San Fran, Boston. Obviously California would go against my previous explanation.

pessimizer 13y ago
Are you criticizing a paper you have never read because of its ignoring of a facet of a possible dataset that you are not certain they have used and admittedly have no idea that if they used it, that facet was ignored?
- Zarathust 13y ago
  To be fair, most of the comments here are merely conjectures about what the paper might say
  - wtvanhest 13y ago
    I can't read it due to the pay wall so I must comment only on what is available.

manicdee 13y ago

Which state was cherry-picked for this study? Did they control for other influences on labour mobility such as working couples, children, pets, race/colour and car ownership?

deleted 13y ago
[deleted]
DanBC 13y ago
(https://news.ycombinator.com/item?id=5823345 https://news.ycombinator.com/item?id=5823345) A web search for some sentences in the abstract returns some useful hits for the paper online. Someone else posted (after you had posted) a link to the full paper. Here's a nice PDF. (http://www.piie.com/publications/wp/wp13-3.pdf http://www.piie.com/publications/wp/wp13-3.pdf)

taliesinb 13y ago

Though I'm not a singularitarian, I do think we are probably going to live an order of magnitude longer than our parents. Given that, buying a house seems too... parochial.

gmrple 13y ago
You think we're going to be living into our 800s?
- huherto 13y ago
  No, he thinks our parents only lived 8 years.
- gojomo 13y ago
  Perhaps he means 'order of magnitude' in base e. Or 2. Or even phi.
- scarmig 13y ago
  I thought about this and I can construct some logic to support his phrasing. Suppose we figure out how to end aging, but people continue to die at the same mortality rate as the 25-34 year old group. That's roughly 1/1000 per year. (999/1000)^692 = 0.5 If we could nudge that mortality rate down a bit, 800 seems like a pretty good ballpark estimate.
- gte910h 13y ago
  Apparently actuarial tables put us at about 600 w/o aging (accidents, etc)
learc83 13y ago
You think we're going to live 10x longer than our parents, but without some kind of singularity/mind-in-a-computer thing? So you think we're biologically going to live to ~800?
- chopsueyar 13y ago
  I seent it... http://en.wikipedia.org/wiki/Kill_Switch_%28The_X-Files%29 http://en.wikipedia.org/wiki/Kill_Switch_%28The_X-Files%29

saosebastiao 13y ago

Can we please get rid of the mortgage tax deduction now?

mynegation 13y ago
Why? I know many Canadians would kill for mortgage interest tax deduction.
- jfb 13y ago
  From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally; and it distorts the housing market in dangerous and destructive ways. Aside from employer sponsored health insurance, it's the most pernicious bit of Federal social engineering.
  - mynegation 13y ago
    Thank you for your answer. On one hand, corporations get tax breaks on debt interest, even in Canada, so why should not people? On the other hand I believe that corporations are way more rational than people in taking on debt. For most people buying a house is not an investment, but very emotional decision, and I see how tax incentive may put more steam into bubbles.
    - gaadd33 13y ago
      But personal bankruptcy still carries somewhat of a social stigma whereas corporate bankruptcy is part of a good business plan.
    - drpgq 13y ago
      In Canada you get an exemption for capital gains on your principal residence, which is a pretty big tax break already.
  - AnthonyMouse 13y ago
    >From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally If it makes you feel any better, the home owner in reality gets practically none of the money. Since everybody gets the deduction it just causes everyone to have to bid that much more in order to be the highest offer. And the higher prices don't really spur new home construction to compensate as you might expect, because the areas with high demand are largely urban areas with minimal available undeveloped land and zoning regulations that often prohibit the construction of higher density housing that would relieve pricing pressure. The result is that the big winners are banks, which end up making larger loans and collecting that much more government-subsidized interest.

nhashem 13y ago

As a resident of Los Angeles, this seems anecdotally (which has the usual caveats) obvious to me. I saw home ownership lead to issues with employment within the Los Angeles metropolitan area. There is a lot of "affordable" ($400K to $600K) single family homes in the San Fernando Valley, or towards Orange County, so I had a lot of coworkers buy homes in those areas. If you work in Venice, a house in Torrance is about a 45 minute commute by car. I know this will sound absurd to a lot of people in HN, but if you told a Los Angelan your commute to work was 45 minutes each way, they would say "that's pretty good." However, if you bought a home in Torrance and live there and a company in downtown LA wants to hire you, even though you're only driving about another 8 miles or so, your commute will probably explode close to an hour and a half, and at least one day a week there'll be some clsuterfuck of an accident on one of the freeways, and you'll have the lovely experience of leaving your house at 8:00am and somehow still being late to your 10:00am stand-up meeting. Fun times! So I saw home ownership cause former coworkers limit their economic mobility to within one section of one city. For them, it was an option to simply wait until a desirable job opened up in the areas with a bad-but-not-intolerable commute, or they were able to mitigate commutes by negotiating flexible hours with their employers (e.g. working 7am to 3pm, or 11am to 8pm, or only coming in 2-3 days a week, etc). I recognize Los Angeles' traffic is about as bad as it gets as far as a home ownership "anchoring" someone, but if home ownership causes a reduction in mobility for professionals in a high-earning and high-demand field, I can only imagine the kind of impact it has on the rest of America.

melling 13y ago
Venice to Torrance is about 20 miles? Commuting great distances of 20-30 miles to work will hopefully be solved sometime in the latter half of the 21st century. I don't think most people in America suffer in quite the same way. Ok, the NYC area can be that bad but most people use mass transit. Maybe there's room to make the roads even wider in CA? Seriously, the problem is self-inflicted and was easily avoidable with some better urban planning 4-5 decades ago.
- pchristensen 13y ago
  s/urban planning/less restrictive zoning/ LA has great transportation bones and layouts (http://www.humantransit.org/2010/03/los-angeles-the-transit-metropolis.html http://www.humantransit.org/2010/03/los-angeles-the-transit-...), but it cannot densify, so it's stuck at a bad level of too dense for cars to work well but not dense enough to be primarily transit based. Metro LA is denser than metro Boston, SF, or Chicago.

KevinEldon 13y ago

Don't miss Philip's point, "let’s always keep in mind that John Ioannidis would predict that a subsequent paper will find a different answer". Anecdotally, my father has a pretty specialized job and got burned repeatedly in the housing market as he moved around for work. In his case it probably would have been a lot better for him if he'd rented almost every home he ever owned. In my case, I'm settling down with my family, friends, and extended family. I do not intend to move for another 20-30 years regardless of work. I think people should take this view seriously... if you want to stay where you are for 30 years and are willing do that despite potentially limited career (and financial) opportunities then owning a home makes sense (and managing your finances to enable this kind of lifestyle makes even more sense). If you want to pursue "the best" work or are concerned about financial security from employment you should consider not buying a home so you can remain flexible. I obviously haven't read the paper, but the idea of home ownership negatively affecting employment is interesting.

huherto 13y ago
This calculator helps you decide if it is better to buy or rent. http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0 http://www.nytimes.com/interactive/business/buy-rent-calcula... As you pointed it out, a key factor is how long you are going to remain in the house.
- ndonnellan 13y ago
  I stumbled upon that calculator after writing one of my own one afternoon; it's cool! Another key factor: house price appreciation and your ROI of capital. If house prices (adj. for inflation) don't rise much (as last 100 yrs or even 40 have shown) and you can make several percentage points above inflation on investing what you would have put into a down-payment, it doesn't matter how long you live in the home. It's all in what kinda SWAGs you make. The default values in the NYtimes calculator are 1100/mo equiv. for $172k, but based on price to rent ratios here in Austin (near 20? http://www.deptofnumbers.com/affordability/texas/austin/ http://www.deptofnumbers.com/affordability/texas/austin/) that home price would be near $250k
- secabeen 13y ago

tocomment 13y ago

By this argument shouldn't marriage also lead to unemployment since you have to live near your spouses job as well and often can't relocate.

saosebastiao 13y ago
Children are a larger determinant of labor immobility. http://www.appstate.edu/~cherrytl/papers/family_ties.pdf http://www.appstate.edu/~cherrytl/papers/family_ties.pdf
mynegation 13y ago
And it probably does. In many situations when one spouse has to move frequently for work or there is no liquid job market (e.g. military, postdocs, medical residents), another spouse find themselves unemployed or need a significant time before finding work which also contributes to unemployment numbers.
rfugger 13y ago
Yes, human relationships are a real drag on the economy.
- gordaco 13y ago
  And, more importantly: the other way around.
giardini 13y ago
Of course. And by extension, note that any factor that constrains your choice of jobs will "lead to unemployment". This is, in essence, a trivial argument and no one should be surprised. The more interesting argument is that the government has promoted home ownership and home loans for decades. And once again the involvement of government leads to suboptimization.

mbateman 13y ago

The paper: http://www.andrewoswald.com/docs/finalmayHomeOwnershipUnemBlanchflowerOswald2013.pdf http://www.andrewoswald.com/docs/finalmayHomeOwnershipUnemBl...

frozenport 13y ago

What about construction jobs that aren't permanent?

obstacle1 13y ago

The paper actually is available for free online [1]. Someone better let Phil know about Google Scholar. [1] - http://www.feifeishi.iie.com/publications/wp/wp13-3.pdf http://www.feifeishi.iie.com/publications/wp/wp13-3.pdf

jpdoctor 13y ago
Look at Figure 2 on pg 17. Does anyone really want to draw conclusions on homeownership and unemployment based on that data?

midas 13y ago

I find our community desire towards home ownership to be really strange. For example, we all need to eat food everyday for the rest of our lives, but you almost never hear society bemoaning how few people own their own means to produce food! We seem perfectly happy to pay for what we use (i.e. rent) instead of investing in production (i.e. own). If you know you're going to live somewhere for 20 years it usually makes a lot of sense to own, but I don't know why we ascribe that aspiration to all our real estate needs.

AJ007 13y ago
It makes a lot of sense in retrospect. People want to own homes because #1 they believe it is a status symbol and #2 they believe the value will go up. Remove either and it wouldn't be so hot. Fractional reserve lending and economic policies toward price inflation have punished renters for a long time. Try convincing someone who thinks home ownership is a good deal that it isn't. I've never succeeded.
- greenyoda 13y ago
  There are many other reasons why people might want to own homes: - Even if the value doesn't go up, eventually you'll pay off your mortgage and be able to live more cheaply. If you rent, you'll be paying rent (which will probably be steadily increasing) forever. If there's inflation, your fixed mortgage payment becomes smaller and smaller in real dollars over time. And while you're paying your mortgage, you get to deduct the interest from your taxes. - If you own your home, you can't be suddenly thrown out because the landlord wants to demolish the building, or raises the rent to more than you can afford (e.g., due to the gentrification of the neighborhood). - In some areas, owning a home can give you access to better school districts. - Detached houses have more space and privacy than apartments. You're less likely to be disturbed by your neighbors, etc. - A home that you own is yours to do with as you please. Want to put a pool in the backyard? Sure. Want to remodel the kitchen? Just call a contractor. Want to convert your garage to an office? That's OK. Want to rent out your house while you go on vacation? There's nobody you need to ask for approval.
  - 13y ago

moocow01 13y ago

I have to wonder though if in aggregate if a predominantly rent based society will lead to even more wealth disparity. While the housing bubble was not exactly the epitome of economic health, we've seen what has happened in the bay area recently. For most bay area tech workers there has been a substantial rise in employability and wages but on the other hand a significant portion on average of the individual economic gains typically have been funneled to increased rent that seems to go up 10-15% every year out here. Heck we even see this in North Dakota with the new oil jobs - the rent for a place in the middle of nowhere has skyrocketed. I guess the point being that Im unsure that low unemployment and mobility strongly correspond to more accumulated wealth for employees.

kqr2 13y ago
The solution is to build more houses. Right now homeowners have an incentive to keep housing stock low (cf. NIMBY). If more people were renters, there would be more of an economic incentive for more affordable housing.
bsims 13y ago
I spend quite a bit of time analyzing lending data and personal finances. I've also observed that when comparing a group of loans, those with homes were almost as likely to default on a loan as those without homes and it had minimal impact despite most people assuming that having a home makes a person "more stable." I have definitely seen many situations where a home becomes the priority over life, family and personal finances as well. On the flip side, this argument also assumes that if consumers get better jobs, make more money, etc. that they'll actually save and/or invest more and the unfortunate reality is that most people just tend to increase their rate of consumption proportionately to their income/bonus increase. So the nature of having a forced savings plan through a mortgage payment requires them to put money away yet still limiting their ability to move or take better positions.

avdempsey 13y ago

It sounds like a straightforward premise: if you're glued to one spot you're eligible for fewer jobs. I wouldn't discount that, except there will be an upside as well: an area with lots of homes might be a good place for more businesses. The question would be which factor has a greater effect? And unfortunately we don't know what the rest of the article says. That's a pity, because we can't see how they account for the giant freaking housing bubble the US had that immediately preceded an epic crash in the economy.

kijin 13y ago
> an area with lots of homes might be a good place for more businesses That will be true even if the people who live in those homes are only renting. People need stuff, therefore stuff sells well where there are lots of people. Homeowners need just as much toilet paper as renters do. Of course, if your business caters to people who extensively modify their homes, you might do better in a neighborhood of homeowners than in a neighborhood of renters. But the DIY home improvement industry only accounts for a small fraction of the total business opportunities that a neighborhood offers.

burritocop 13y ago

Buying a house ruined my life. I bought a house with my savings after the collapse. Got it really cheap (no mortgage). Only problem is now I want to sell it but can't. There are no jobs around here. I do have a crappy job. I could probably do better if I could afford to move away. I've considered just abandoning the property or selling it for basically nothing. Buying sucks. As does renting. I've seriously considered van life. http://cheaprvlivingblog.com/ http://cheaprvlivingblog.com/

gaadd33 13y ago
Why not rent it? If you got it really cheap just rent it for the cost of the property taxes.
- burritocop 13y ago
  Renting includes a number of financial and legal responsibilities. Bad tenants can be a nightmare. I don't really want to risk having to deal with that drama. Right now I'm thinking I'll just have to sell the house at a loss. Not really so bad. It won't be a tremendous loss and I have lived in 3 years. I guess in the end it would have been the same had I just rented. Previous to this I did rent for a long time and hated that. I really am serious about the van thing.
  - gnoway 13y ago
    Have you looked into working with a property manager? They do all the screening and tenant management stuff for you. You give them a fixed percentage of the rent and I guess you're the wallet for repairs, etc. Unless their take of the expected rent would result in a negative cash flow for you, it seems like a better option than selling at a loss.

greghinch 13y ago

There's a number of other factors that usually coincide with home ownership that would produce the same effects, chiefly domestic partnership and children. The problem seems to be more that the increase in necessity of labor mobility has far outpaced the progression of transportation. Public transit in most of the US is a bad joke. And high speed transit is all but non-existent. I don't really have any idea how we reduce the car-culture, but that seems to be the root of the problem, not home ownership.

foobarian 13y ago

Hear, hear. How dare the serfs even think about owning their own home. They should be grateful to the merciful overlords for the opportunity to rent crappy overpriced and cramped housing where they can't nail things to the wall or have a dog. Not to mention the ever present threat of eviction by sale. That's what popped into my head when I read that post. But I lived in Cambridge, MA long enough to have a chip or two on my shoulder. :-)

jleyank 13y ago

I was told this and I tell others: If you have to move to take a new job, don't buy. If, however, you can reasonably map a career (or, say, 10 years of it) without moving, the system is set up to reward home ownership (particularly for US-ians I think). It's not an investment, although it has aspects of one. It's not a boat anchor either, but can serve as a good approximation in down times. Just be #!*&% careful when committing serious coin to the man.

miles 13y ago

The NYT article linked to in the comments section has much more detail: Challenge to Dogma on Owning a Home http://www.nytimes.com/2013/05/10/business/homeownership-may-actually-cause-unemployment.html?pagewanted=all&_r=0 http://www.nytimes.com/2013/05/10/business/homeownership-may...

johnvschmitt 13y ago

Hmm... It seems the major factor is simply overbuilding. "Overbuilding in one year leads to lack of building in subsequent years". As building homes is a big cause of temporary job growth. Also, I doubt long commutes lead to higher unemployment rates, as the economic pressures would step in. Companies hire to meet consumer demand. If they need workers, they'll raise wages, or open satellite offices where the workers are. They don't just stop hiring & let their production go down when they have orders.

31reasons 13y ago

The solution is very simple: Remote Work. I hope research like this one help make remote work be seen as a positive force in overall well being of the country. It saves Time, Energy and Gives More Opportunities and so Reduces Unemployment. It think its a great deal. I hope government can give some incentives to businesses for hiring remote workers by lowering employment tax.

gordaco 13y ago

I haven't read the paper, but I'm from Spain and I've seen several things that support the hypothesis. 1) Home ownership ties you to a geographical location. If you're renting you have more freedom to move, and increased mobility leads to less unemployment. This is the most obvious reason, but not the only one. 2) If mortgages take away a big enough portion of the paycheck, consumers have on average less money to spend in another things, and lack of demand can cripple the economy, while banks leech all the money ("extractive elites"). If rent was more prevalent, it would be easier to move to a more affordable house from time to time, driving down home prices (it would be kind of a "less captive" market; I'm not sure if that makes as much sense as I think). 3) The prevalence of mortgages gives employers a lot of leverage. If you're in serious debt, you're more likely to accept worse condition on your current job, because you can't afford to miss a payment (miss enough payments and you lose your house but keep your debt). Maybe it's a cultural thing, but this is a very real thing here in Spain. The effect is that employers can force worse conditions (especially lower salaries) on employees, which, again, creates a lack of demand because people don't have money to spend. Even worse, once you hit certain level of unemployment (which nevertheless was very high in Spain to begin with), it affects you even if you don't have a mortgage, because there is a huge amount of people willing to work for peanuts, driving salaries down for everyone and creating a feedback that reinforces the whole process.