I just wrote about the new study renewing the debate on whether underwater homeowners are stuck in their communities due to the “lock-in effect.” The hypothesis states that underwater homeowners are so reluctant to leave their homes at a loss or file bankruptcy that they stay put and try to find work locally, even if it means taking lower-paying jobs or jobs for which they’re overqualified. Critics of the effect argue that sometimes (as in the Great Recession) there aren’t good jobs anywhere, so if possible people stay put in their homes because there’s nowhere to go. Now, an analysis from the Pew Research Center raises a similar concern: Why are millennials not moving even though they are freer to do so than prior generations?
Indeed, unlike the locked-in homeowners millennials don’t own homes—much less underwater homes. In the past, young Gen Xers or baby boomers were much more likely to move even though they were homeowners. More than half of baby boomers owned their homes in the early 1980s as opposed to less than 40 percent of millennials in 2016. This means that many young Americans are renting but they’re not moving.
Moreover, millennials aren’t married as much. Spouses can create a separate set of living preferences, which is sometimes referred to as “the two-body problem” at least when academics’ careers are involved. When one spouse finds a new job at a new location, the other one might need to abandon a career or settle for a suboptimal job. Parents or other relatives may live in different locations pulling the couple to one place or another.
Finally, because they’re unmarried, young Americans are less likely to have children. More than half of millennials were childless in 2016, but more baby boomers and Gen Xers had kids when they were the same age. Children also hamper mobility, so that’s one more reason that young Americans aren’t moving when they have fewer obligations tying them to where they are.
The Pew article offers a few reasons for young Americans’ reduced tendency to move. One is employment. There’s some debate in the press about whether the U.S. economy has fully recovered, but for the most part, young Americans earn less, save less, and owe more than prior generations. Understandably, they’re moving less. Second, tighter lending standards might be preventing millennials who want homes from buying them. Third, without spouses and kids, there’s less of a reason to buy a house. Why pay for unneeded space?
Young Americans’ unwillingness to move might contradict the “lock-in effect.” If millennials don’t have anywhere to move to, then maybe older, underwater homeowners don’t either.
The Pew study is here.
Younger Americans’ problems tend to revolve around student loan debt, but if your home is underwater and it does not look like your situation will improve, then talking to an experienced New York bankruptcy lawyer can help you strategize your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
