housing market crisis, labor market, home values


Other Business | Real Estate


The recent housing crisis has had drastic effects on the labor market. Falling home values have forced some homeowners to remain in their homes for financial reasons even when a move is desired because they are locked-in. When labor cannot move freely from place to place, employment is affected. The greater the lock-in effect, the more negative the labor market externalities. In this paper, the relationship among homeownership, labor mobility, and unemployment is examined. The lock-in effect, nominal loss aversion, and Oswald’s hypothesis will all be applied to the recent housing crisis in an effort to show the drastic economic effects the crisis will continue to have into the future. The results of this research predict that the economic recovery will continue to be slow and that the labor market may not fully recover for a very long time. More research will certainly need to be done to confirm these findings and the correlation among homeownership, labor mobility, and unemployment.