Bo’s Clips: Homeownership and Labor Mobility

The “American Dream” of homeownership is challenged by a new study that links high rates of unemployment to high rates of homeownership. Individual efforts to cling to homes limit mobility to jobs. Meanwhile, another investigation notes that as the housing market improves, so does worker mobility.

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Challenge to Dogma on Owning a Home

By Floyd Norris       New York Times      May 11, 2013

Homeownership is a good thing, for the individual and for society. Or so American governments, whether Republican or Democrat, have long believed. The benefits have been cited repeatedly in justifying the existence and expansion of the tax breaks given to home buyers.

But maybe it isn’t nearly as good as had been thought.

A new study by two economists concludes that rising levels of homeownership in a state “are a precursor to eventual sharp rises in unemployment in that state.” As more homes are owned, in other words, fewer people have jobs.

The study, by David G. Blanchflower of Dartmouth and Andrew J. Oswald of the University of Warwick in England, does not argue that homeowners are more likely to lose jobs than are renters. But it does argue that areas with high and rising levels of homeownership are more likely to be inhospitable to innovation and job creation and to have less labor mobility and longer commutes to work.

“We find that a high rate of homeownership slowly decimates the labor market,” Professor Oswald said.

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Insight: Housing improvement may herald return of U.S. workforce mobility

By Steven C. Johnson and Margaret Chadbourn        Reuters       May 13, 2013

When David Pendery, a corporate public relations specialist, decided to move his family from Colorado to Illinois this year for work, his biggest worry was whether he would be able to sell his home quickly.

It took just three days.

“We certainly thought selling our house would take longer,” said Pendery, who started in February at Kerry Ingredients, a flavoring provider for the food and beverage industries.

Pendery’s experience may be on the extreme side, but his case may be a sign of a revival in one of the historical advantages of the U.S. job market: the ability of workers to go where the jobs are.

For much of the past five years, falling house prices effectively locked people in their homes, since many were “underwater” – owing more on their mortgages than they could raise by selling.

At the same time, double-digit unemployment across much of the nation meant there were few jobs to move for anyway.

That may be changing. While far from their 2006 peak, home prices in major metropolitan areas have been rising since early 2012. If that persists, it should make it easier for Americans to move and for employers to match job seekers with available jobs, lowering the jobless rate and increasing overall economic productivity and growth.

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Freddie Mac posts second-biggest profit in its history

By Margaret Chadbourn        Reuters      May 8, 2013

Freddie Mac (FMCC.OB), the No. 2 provider of U.S. mortgage money, on Wednesday said it reaped its second-largest profit ever in the first quarter, a reflection of housing market gains that have taken the steam out of efforts to revamp the nation’s home loan system.

The government-controlled company reported net income of $4.6 billion for the first three months of the year, up from $577 million in the year-ago quarter. It cited rising home prices, falling mortgage delinquencies and increased refinance activity for the improved performance.

It was the company’s sixth straight quarterly profit and the largest since a $5.7 billion gain in the third quarter of 2002.

“The strong rebound in the housing market … continues to be reflected in our excellent financial performance,” Freddie Mac Chief Executive Officer Donald Layton told reporters on a conference call.

Freddie Mac, which faced insolvency when it was seized by the U.S. government in 2008 along with its larger rival Fannie Mae (FNMA.OB), paid $5.8 billion to the U.S. Treasury in the first quarter as a dividend payment under the terms of its government bail-out.

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Fannie Mae to pay $59.4bn back to US taxpayer and forestall debt battle

Repayment will boost Treasury coffers ahead of 18 May expiration of political deal over national debt limit

By Dominic Roushe      The Guardian [UK]       May 9, 2013

The government-backed mortgage giant Fannie Mae is to pay $59.4bn back to US taxpayers, in a move that is likely to forestall a looming battle over the federal debt limit.

The mortgage finance company announced on Thursday that it had earned a record $58.7bn from January through March, benefiting from a one-time accounting move that allowed the company to lower its tax liability, as well as the recovery in the housing market.

In 2008, the government poured about $170bn into Fannie Mae and its smaller sibling, Freddie Mac, to save them after the financial crisis. Fannie Mae received about $116bn in loans. With its latest dividend, it will have repaid about $95bn. The payment looks set to boost the Treasury’s coffers as it sees off a summer of fighting over the debt limit.

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United Way commits $1M to transitional housing initiative

By Meredith Moriak           Midland Reporter      May 9, 2013

The United Way of Midland announced Thursday a $1 million commitment to establish transitional housing for families in need.

Identified on community needs assessments for more than 10 years, United Way of Midland Executive Director Donna Mahurin said the nonprofit finally decided to address the need for transitional housing.

A 15-member steering committee, formed last August to research transitional housing programs in other areas of the country and to consider implementation of a program in Midland, is currently seeking suitable home properties and developing a unique program.

Transitional housing will allow families to move from crisis situations into a case-managed environment where they can work on self-sufficiency and build assets, Mahurin said.

“Many times people don’t have the tools to get out of a crisis situation. They may go into emergency housing, but they aren’t ready to reenter the world once their time is up,” Mahurin said. “This transitional housing program is designed not to put a Band-Aid on the problem, but to be a life changer.”

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