Americans have been moving less since 1990, despite technological advances, increased immigration, and higher education levels, all factors one might expect to boost migration. What are the causes and impacts of this trend, particularly on the mortgage market?
According to experts at the Urban Institute’s recent Data Talk, evidence suggests that 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.
Recent demographic and socioeconomic changes are not to blame for decreased mobility
According to Raven Molloy, a researcher at the Federal Reserve, the percentage of interstate movers dropped from nearly 3 percent in the 1980s to less than 1.5 percent from 2010 to 2015.
The 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. Yet, Molloy’s data show that migration has been declining for people of all ages and for renters and homeowners alike.
In fact, migration has been declining across all demographic groups, including gender, education, race, income, marital status, employment status, and metropolitan area. 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.
We might point to postrecession housing affordability problems and increased land-use regulations, but Molloy’s research shows that migration has fallen substantially even in states with low house values and/or relatively lax land-use regulations.
If demographic trends, socioeconomic trends, and housing prices can’t explain the variation in migration, what other factors could be at play? Molloy concludes that something in the labor market is causing the slowdown.
Labor market changes are somehow decreasing mobility
The fraction of people changing occupations, industries, and employers slowed between 1990 and 2011. Molloy finds that this labor market trend falls in roughly the same time frame as the migration decrease, and the states with the largest declines in job transitions also have the largest declines in migration rates.
But are job market conditions causing lower mobility, or does lower mobility cause job market changes? Molloy believes that the job market conditions are causing lower mobility because long-distance moves are most often job related.
In addition, the migration flows are too small to explain the job market changes since the percentage of the population that changed employers fell about 4 percent, while the percentage of the population that changed states fell only 1 percent.
Less migration means fewer originations and defaults, more renovations and longer-term mortgages
What does lower interstate migration mean for the mortgage market? Sam Khater, an economist at CoreLogic, said that 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.
Geographic mobility declined dramatically between 1990 and 2010, and increased slightly from 2010 to 2015. Understanding the reasons behind these mobility changes will help us understand if there are barriers preventing people from moving to the jobs and places they want to live. And understanding the impacts of these changes helps ensure that our policies recognize and address reality.