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How negative equity affects unemployment rates

Posted by: maura on 4/13/2012

A study looked at how borrowers who owe more than their home is worth (underwater) might be limited in their ability to move because of their housing situation. This can perpetuate a high unemployment rate if homeowners can’t move for economic reasons. The report’s authors found that “house lock” definitely decreases a household’s mobility options, but in aggregate has had a negligible effect on the nation’s unemployment rate.

The report did note that 7.3 of Vermont’s “non-prime” homeowners were underwater in their home mortgage in 2009. State’s with higher proportions of underwater mortgages, had lower rates of mobility, although Vermont was not one of the states with a high rate of underwater homeowners.

The Federal Reserve Bank of Boston released the report in early February.