Home Equity, Mobility, and Macroeconomic Fluctuations
DNB Working Papers from Netherlands Central Bank, Research Department
How does a fall in house prices affect real activity? This paper presents a business cycle model in which a decline in house prices reduces geographical mobility, creating distortions in the labor market. This happens because homeowners face declines in their home equity levels, after which it becomes more difficult to provide the down-payment required for a new mortgage loan. Unemployed homeowners therefore turn down job offers that would require them to move. The model explains joint cyclical patterns in housing and labor market aggregates, as well as the puzzling breakdown of the U.S. Beveridge curve that occurred during 2009.
Keywords: Housing Markets; Labor Markets; Refinancing Constraints (search for similar items in EconPapers)
JEL-codes: E24 E44 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-ure
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Journal Article: Home equity, mobility, and macroeconomic fluctuations (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:265
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