Does Home Ownership Lead to Unemployment?
You wouldn’t think that home ownership leads to unemployment, but that’s exactly what a recent study found.
The researchers from Dartmouth College in New Hampshire and the U.K.’s University of Warwick looked at home ownership and unemployment rates in developed countries and found a strong connection between the two. They speculate that once people own a home, they are less likely to move to find a job.
So, if the local job market starts to suffer home owners find it much harder to pack up and move to where there is a better job market. Instead, they will stay with their home and continue to look for a job.
Not the Only Cause
The researchers admitted that the tie with home ownership isn’t the only or most important factor that leads to higher unemployment rates but says there is a definite connection. They cite examples from countries like Spain, which has high unemployment, and Switzerland, which has low unemployment.
Of course changes in the global and local economies, business trends and other factors can lead to higher unemployment. But the numbers argue that if home ownership was lower in areas affected by high unemployment due to other factors, more people would be mobile and find employment elsewhere.
Should You Never Buy a Home?
If home ownership is going to contribute to your chances of being unemployed, should you never buy a home then?
The researchers said that isn’t entirely true.
Professor Andrew Oswald, one of the head researchers, said that it makes sense for older employees to buy homes. Towards the end of their careers they are getting ready for retirement and should be looking to put down more solid roots as they are less likely to need to relocate to find work.
“If we look at extremely successful countries like Germany and Switzerland, we see that people aspire to home ownership near the end of their lives,” said Oswald. “That is rational and efficient. But when people are young, you want them to be mobile.”
Obsession with Home Ownership
Owning a home has always been part of the “American Dream” but as we saw in the 2008 financial crisis, owning a home when you shouldn’t can lead to serious financial consequences. If the system allows home ownership for too many people who financially shouldn’t, then the financial system itself could be put at risk.
What this study and our experiences during the housing bubble and ensuing financial crisis should teach us that owning a home is only a good investment for some people sometimes. There is no such thing as a universal good investment. People and their money situations are too diverse and too fluid to say that there is one hard and fast rule we should all follow.
If your dream has always included owning a home, then by all means pursue that dream. But if you don’t have the means to buy a house and overextend yourself, your dream could turn into a nightmare. If we heed the advice of this study, we’ll also see that you shouldn’t let home ownership limit your employment options