Real Estate News January 7, 2010, 2:07PM EST

Unable to Move, Struggling Homeowners Are Also Unable to Find Jobs

Many out-of-work Americans are unable to find jobs because they are chained to their homes

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By Steve Matthews, Mike Dorning and Daniel Taub

(Bloomberg) — Raul Lopez, laid off from three construction jobs since October 2007, is focusing his search for work near Antioch, California, because his $392,000 mortgage is almost triple the price his home there would sell for today.

"If it wasn't for the house, I'd probably move closer to Oakland, Hayward, San Leandro, places where there are jobs," said Lopez, 36, who is married with four daughters.

The ability to relocate for employment, which helped the U.S. recover quickly after previous deep recessions, is the latest victim of the housing bust. About 12.5 percent of Americans moved in the year ended March 2009, the second-lowest ever, estimates Brookings Institution demographer William Frey, after a 60-year record low of 11.9 percent the previous year.

Local moves may rise "a little bit" in the 12 months that end this March, with long-distance migration "staying flat," Frey said. "Both will be below normal levels from earlier in the decade."

Some households are staying put because they owe more on their mortgages than their properties are worth; others have trouble selling houses in depressed areas, economists say. The S&P/Case-Shiller composite index of home prices in 20

U.S. metropolitan areas was down 29 percent in October from its July 2006 peak.

"One of the hallmarks of America's labor market is a high level of mobility," said Joseph Stiglitz, a Nobel Prize-winning economist, in a Jan. 3 interview in Atlanta, where he was speaking to an economics conference. "We are about to lose that."

Stagnant Workforce

The stagnant workforce may raise the long-term trend rate for unemployment by 1 percentage point and lower economic growth 0.3 percent a year through 2012, said Michael Feroli, an economist in New York for JPMorgan Chase & Co. It has already contributed to keeping the jobless rate as much as 1.5 percentage points higher than would have been suggested by the depth of the recession, Peter Orszag, director of the U.S. Office of Management and Budget, estimated in July.

The U.S. economy shrank 3.8 percent in the 12 months that ended in June, the worst performance since the 1930s. Unemployment reached a 26-year high of 10.2 percent in October before sliding to 10 percent in November. The rate stayed at 10 percent in December, according to the median estimate of 72 economists in a Bloomberg News survey. The Labor Department will release the data on Jan 8.

Pharmaceutical and biotechnology companies have lost potential employees in the past two years as candidates are stuck with houses worth less than their mortgages, said Deborah Coogan Seltzer, a vice president in Atlanta for the Dallas-based executive search firm Pearson Partners International. Some prospects also worry it may take a year or more to sell their homes, even if they have equity in the properties, she added.

Candidates Withdraw

"It's a constant factor," Seltzer said. "Conservatively, in at least 70 percent of the searches I've worked on in the last 12-to-18 months at least one or two candidates have withdrawn from the process after they've investigated their real-estate situation."

Some companies are allowing recent hires to stay where they are and use a combination of telecommuting and traveling, said Kevin Kelleher, president and chief executive officer of Danbury, Connecticut-based Cartus Corp., which specializes in relocation.

Employers and their prospects are "thinking about assignments or commuting policies rather than picking up the family and moving on," he said.

Seltzer and Kelleher declined to provide names of specific companies.

Labor-Market Recoveries

The ability and willingness of workers to relocate has contributed to labor-market recoveries following recessions that ended in March 1975 and November 1982, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody's Economy.com. The unemployment rate fell 1.6 percentage points to 7.4 percent in May 1976 from a year earlier and dropped 2.5 percentage points to 8.3 percent in December 1983 from the previous December.