Research project How home prices reduce migration

It is, albeit simplified, logical that people move from places where they earn less to places where they earn more. But where earnings are higher, housing is also more expensive which counteracts this. A homeowner can sell their house and use the revenue to buy a new home in their destination, but what happens if that house’s value fall at the same time as both you and your neighbors want to leave?

In this project I study using Norwegian registry data how homeowners and react differently when unemployment rose in Stavanger in 2015, following a great rise in U.S. fracking of oil which drove down global oil prices. The total outmigration from the region did not increase during the four years that followed, but among owners of cheaper homes and renters, it rose by 40 percent. Those who owned more expensive homes lowered theirs 26 percent.
Because of the richness of Norwegian registry data, I can show that this isn’t only because of some people have large mortgages that they cannot cover by selling their home. It is neither due to other characteristics of these homeowners (e.g., age, income, family in the region) that explains the behavior.

In a macroeconomic model that incorporates several of the differences between homeowners and renters, I can simulate what transpired in Stavanger, and also there the richer homeowners exhibit an unwillingness to leave. The fall in home prices is key for the model to replicate reality, and the model shows that the fall made it less attractive to move away.

The natural conclusion of this mechanism is that it will be difficult for policymakers, through moving vouchers, to make people want to leave a place where prospects have worsened. As long as it is more attractive to stay in your house (that just happens to have lost some of its nominal value), it will require a lot to make you move.