NYT Economix says that the average length of unemployment is the longest ever recorded, up to more than 40 weeks (compared to less than 15 weeks in the downturn of the late 1940s). According to the Census, home ownership rates have been growing gradually since 1950, as has the duration of unemployment.
Let’s look at a couple of reasons that increased homeownership could lengthen unemployment periods. Let’s consider mobility. There is a large variation in demand for labour across states and regions. Homeowners are crippled in terms of mobility compared to renters. The homeowner, especially in a state with a shrinking number of jobs, may need months or years to sell a house and move. He may delay the move for months in hopes of landing a local job that will spare him the pain of paying a 6 per cent real estate commission. A renter can pack up, tow a U-Haul, and be on the other side of the country within a month.
A renter may feel more urgency about earning enough money to make monthly payments. A landlord can get a non-paying tenant evicted, in most states, in a matter of weeks. Now that the mortgage industry has combined 21st Century financial engineering with 19th Century methods of handling paperwork, and therefore nobody can say who owns anything (we’ve turned the U.S. into the kind of informal economy that we once derided), it might take years to foreclose on a homeowner after he or she stops making payments.
So it may be that the more we encourage homeownership the more we engender long-term unemployment. Perhaps therefore the trillions of dollars that we’ve poured into subsidizing homeownership (mortgage interest deduction, propping up Fannie Mae, etc.) were ill-considered. In a fast-growing global economy, maybe a big competitive advantage for a nation is a mobile workforce of renters.
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