UI: Fewer Mortgage Default, More Equity as Americans Move Less

Since 1990, Americans have been moving less. In some ways–particularly when it comes to mortgages and home equity–that hasn’t been such a bad thing, as it turns out.

At a recent Urban Institute event, analysts said the decreased mobility is due in some way to the labor market, not demographic or socioeconomic changes. And that decreased mobility means fewer mortgages and fewer defaults, as borrowers have more time to build equity. It also brings more home-improvement loans for families planning to remain in their homes longer.

Raven Molloy, a researcher at the Federal Reserve, said the percentage of interstate movers dropped from nearly 3 percent in the 1980s to less than 1.5 percent from 2010 to 2015. While an aging population and the decline in homeownership seem like obvious culprits for a decline in interstate migration since the elderly and homeowners are both less likely to move, Molloy said migration has been declining for people of all ages and for renters and homeowners alike.

“Migration has been declining across all demographic groups, including gender, education, race, income, marital status, employment status and metropolitan area,” Molloy said. “College-educated people tend to move more, but even this group is seeing migration declines. And migration is declining for both foreign-born and native-born residents.”

Molloy said migration has fallen substantially even in states with low house values and/or relatively lax land-use regulations. She said labor market changes are somehow decreasing mobility, noting the fraction of people changing occupations, industries and employers slowed between 1990 and 2011.

Sam Khater, economist with CoreLogic, Irvine, Calif., said lower housing turnover leads to lower-purchase loan originations and potentially lower defaults, as homeowners have more time to build equity. Lower migration can also increase demand for second liens, as homeowners decide to renovate the homes they plan to live in for a longer time. Decreased mobility could also decrease demand for mortgage products that minimize interest rate risks, such as fixed-rate mortgages or longer-term adjustable-rate mortgages.