Is the High Home Ownership Rate Hurting Michigan?

From a recent CD post:

Homeownership impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more. Homeowners are much less likely to move than renters, especially during a downturn, when they aren’t willing (or can’t afford) to sell at market prices. As a result, they often stay in towns even after the jobs leave. And reluctance to move not only keeps unemployment high in struggling areas but makes it hard for businesses elsewhere to attract the workers they need to grow.

The chart above displays the home ownership rates in Michigan and the U.S. from 1990 to 2007, showing that Michigan has historically been about 8 percentage points above the national average, currently at 68.1% for the country and 76.4% for Michigan. Only two states, West Virginia (77.6%) and Delaware (76.8%), had a higher home ownership rate in 2007 than Michigan.

Michigan has had the highest state unemployment rate in the country for at least several years - it was 8.5% in July, 0.60% higher than the next-highest state, Mississippi (7.9%).

Perhaps the high home ownership rate in Michigan, resulting from a legacy of many decades of dependable high-paying auto-related jobs, is now hindering an economic recovery here by tying workers to their Michigan home, reducing their mobility, and keeping the jobless rate high. It certainly doesn't help that home prices are falling here, which only makes the problem worse when homeowners would have to suffer a significant loss to move to another state where jobs are more plentiful.

Comments

[rm:]

[Perhaps the high home ownership rate in Michigan, resulting from a legacy of many decades of dependable high-paying auto-related jobs, is now hindering an economic recovery here by tying workers to their Michigan home, reducing their mobility, and keeping the jobless rate high.]

You have to look at more than one stat. MI would be hurting regardless of whether more people had left the state. There's already been a net loss of population the last few years running.

Believe me, nearly everyone who's facing foreclosure is looking at their LTV when they consider what to do next.

Despite the high rate of homeownership, there's still a massive oversupply of housing stock.

I'm trying to understand how less people living in Michigan would help to begin a turnaround.

What -would- help is a more favorable tax structur and business environment. Thus far, the state has continued its kowtowing to the auto industry.

The ROI? A net loss of over 300,000 manufacturing jobs.

Now, they're trying to hang their hats on "green collar" jobs. There are several other states that are more attractive to manufacturers... so, we'll see.

2008 Sep 14 12:36 PM

[Tom Lindmark:]

You have hit on the fallacy of a government policy of homeownership for everyone. Like any policy there are unintended consequences. One is that you tether people to property when in fact mobility is in their best interest. One of the great strengths of the U.S. economy has been labor mobility and we are in danger of losing that. I wrote an article several months ago on this subject. Here is a link and it contains a well written rebuttal to my ideas. blog.metro-real-estate...

2008 Sep 14 12:53 PM

[WILLTK:]

Michigan has one thing many states do not , to cause the high home ownership . Lake Michigan shoreline , Lake Huron Shoreline - Lake Erie Shoreline , Lake Superior shoreline . And all the resort towns that go with the shore - many Illinois , Ohio ,Indiana and Missouri plates on the highways here all summer - The high home rate is second home owners - the upper crust who could afford at one time to buy the best of the best properties all lakefront , at 10 to 50k a foot . Do your home work Mark , "if you seek a pleasent peninsula , look around you " still holds true - just not much selling happening I agree

2008 Sep 14 04:19 PM

[CLH:]

Yes you are right. Too may homes in a dying socialist state run by unions.

2008 Sep 14 06:29 PM

[Steven Hansen:]

Dr. Mark - good post. I agree with you.

2008 Sep 14 08:25 PM

[TBill:]

Idiotic policies of the 'goverment is the solution' powers that be have run the state into the ground. When things get tough, they raise taxes! If people weren't tied to their houses, they'd be a lot less people there, and a much lower tax base as people run for their lives! Hey, I grew up there and was smart enough to get out as soon as I could.

My relatives have seen a 33% [sic] drop in their home values since Jan 06! Yikes! And that's typical. Go to zillow.com and plug in an address... take a look at the graph of the estimated value. Why? Because people are desperate to leave! Just as people were desperate to get out of Detroit decades earlier, the black hole sucks in more and more of the state. Meanwhile, the socialists running the state spend millions on an ad campaign telling us how MI is such a good state to start a business in. They even have another government program to help you get set up! We would laugh, but who lived there find it so sad.

2008 Sep 14 10:43 PM

[jimsep:]

Thank the UAW, Dingle and Levin for all this.

2008 Sep 15 12:49 PM