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One question that’s been rattling around the back of my brain is whether the housing bubble—and subsequent downturn—is going to make it harder for companies to convince valued employees to relocate. Or conversely, whether employees will turn down transfers because of the housing mess.
I got to think a bit more about the issue when I recently came across this article written by a reporter for MarketWatch, Cooling Housing Markets Make Job Candidates Reluctant to Relocate. Here’s one scenario in my mind: You work in a city where the appreciation is modest, and you’re asked to transfer to a city that’s had a bubbly run-up — say, San Diego, Miami, Washington D.C., or Boston. Of course, there’s the prospect that you’ll have to take on a higher mortgage, but companies historically could deal with that by giving you a cost-of-living raise to account for the higher cost of living in, say, San Diego. But would you want to buy a house in the current situation in San Diego? Or Miami? You could be facing the risk of a $750,000 house being worth $650,000 this time in 2009. Will a corporate be willing to guarantee that you won’t lose money on your house if you move?
I know that some companies used to help out employees who had a low interest rate on their existing home, and were being asked to relocate at a time when rates were higher, by "subsidizing" the difference in rates between their old mortgage and their new mortgage. And I suspect that there are some large companies who in the past absorbed either all or part of any losses an employee incurred when selling a house during a transfer.
But in the past, I betcha the losses were small. Will they be willing to do it now when you could be -- or already are -- staring at $100,000 or $150,000 plunges in home values in overheated markets? I'd love to hear from anyone who's already had to cross this bridge with their employer, or conversely from any business owners as to how they're dealing with this issue.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.