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

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While some economists say the recession that began in December 2007 may have ended last summer, unemployment will fall only 0.8 percentage point to an average of 9.2 percent in 2011, according to a December Bloomberg News survey of 46 economists.

"You don't have to be a rocket scientist" to know that unemployment will be higher and "the noninflationary speed limit, or what economists call the potential growth rate of the economy, is going to be lower as a result of the housing-related decline in labor mobility," David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto, said in a Jan. 4 telephone interview.

'Negative Equity'

Almost 10.7 million homes, or 23 percent of all mortgaged properties, were worth less than the debt owed on them at the end of the third quarter, according to a Nov. 24 report from First American CoreLogic. An additional 2.3 million mortgages are approaching "negative equity" as loan defaults mount nationwide, the Santa Ana, California-based real-estate research company said.

Sixty-five percent of Nevada homeowners owed more than their houses were worth, the highest rate in the nation, according to the report. Arizona ranked second, at 48 percent, followed by Florida, Michigan and California.

States that grew the fastest during the 2002-2006 housing bubble, including Florida and Nevada, are now experiencing reversals in population trends. The number of people in Florida, where unemployment is 11.5 percent, fell 58,294 in the 12 months ended April 2009, the first decline since 1946, the University of Florida Bureau of Economic and Business Research estimated in August.

Can't Sell

More people might have left if they had been able to sell their homes, said Jack McCabe, president of McCabe Research & Consulting in Deerfield Beach, Florida, which specializes in real estate.

"Loan modifications have been of insignificant help," he said.

Through November, U.S. lenders had permanently renegotiated about 31,000 of the 4 million mortgages targeted for relief by the Obama administration's foreclosure-prevention plan.

Housing woes have exacerbated a decline in worker mobility that began in 1951, when 21 percent of Americans moved, according to the Census Bureau. More families now depend on two incomes, which makes moving more complicated, said Peter Francese, a demographic-trends analyst in Exter, New Hampshire, for New York-based advertising agency Ogilvy & Mather Worldwide.

Aging Population

The aging U.S. population also reduces mobility, he said. The largest age group is 45- to 55-year-olds and the fastest- growing segment is 55- to 65-year-olds, both of which have established family and social networks that complicate relocation, Francese said.

Out-of-state moves, usually associated with job changes, remained at a record low 1.6 percent of the population for a second year in the 12 months ended March 2009, Brookings' Frey estimates.

Anecdotal evidence suggests an even lower rate for the full year. Shipments handled by movers and paid for by individuals in the first half dropped 18 percent from January-June 2008, while employer-paid moves fell 27 percent, according to the American Moving & Storage Association, an industry trade group based in Alexandria, Virginia.

"This is our first national slump caused by a housing bubble and that ties down workers," said Nobel Prize-winning economist Paul Krugman in a Jan. 4 interview. "It is a transitory thing, but transitory can mean several years."

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net; Daniel Taub in Los Angeles at dtaub@bloomberg.net

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