Negative Equity and Residential Mobility
The housing bust that began in 2006 reversed much
of the price appreciation that occurred during the
earlier part of the decade. Rising interest rates and
falling house prices often raise concerns about negative
equity and the possibility of "strategic defaults," where homeowners
choose to foreclose on their homes because of
a loss in equity. But to what extent do rising interest rates
and negative equity impact residential mobility?
Using two decades of American Housing Survey data
from 1985 to 2007, Fernando Ferreira, Joseph Gyourko,
and Joseph Tracy find that that negative equity and rising
interest rates serve to 'lock-in' owners to their homes— reducing, not raising mobility. The authors control for
characteristics such as family size, educational attainment,
marital status and family income. They find that
having negative equity reduces the two-year mobility rate
by four percentage points, a one-third reduction from the
baseline mobility rate. Observing the effects of different
levels of negative equity, the results suggest that mobility
declines are larger when negative equity is higher. Additionally,
higher monthly interest costs also reduce mobility;
a $1,000 higher real annual mortgage interest cost is
estimated to reduce mobility by 1.4 percentage points, or
by about 12 percent of the baseline rate. Lower residential
mobility has important implications for the labor market
as households may not be able to move to access jobs, a
particular concern given present employment conditions.
The authors warn that the results cannot simply be extrapolated
into the future, but the findings do have implications
for the recent concerns around the housing bust
and the potential impact of negative equity on household
Ferreira, Fernando, Joseph Gyourko, and Joseph Tracy. (2010). Housing busts and household mobility. Journal of Urban Economics. July 2010. 68(1): 34–45.
The Education of Children Living in
Most public housing developments in the U.S. are
located in socially and economically disadvantaged
neighborhoods, often with high concentrations
of poverty and large shares of minority residents.
Previous research has demonstrated that children growing
up in these developments tend to have worse social and
economic outcomes later in life, including poorer health
and lower educational attainment. However, relatively
little is known about the characteristics of the schools
serving these children.
Amy Ellen Schwartz, Brian J. McCabe, Ingrid Gould
Ellen, and Colin C. Chellman use data from the New
York City Department of Education and the New York
City Housing Authority to examine the characteristics
of elementary and middle schools attended by students
living in public housing developments in New York City.
They find no large differences between the resources and
teacher characteristics at the schools attended by students
living in public housing and the schools attended by
their peers living elsewhere in the city. Per-pupil expenditures
at the typical school attended by students living
in public housing are approximately 12 percent greater
than expenditures at other schools. However, students
living in public housing perform substantially worse on
standardized math and reading exams than their peers
living in other neighborhoods. In fact, students living in
public housing earn lower scores on standardized tests,
on average, than their schoolmates who attend the very
same school but live outside of public housing.
This research suggests that the causes of the educational
achievement gap that exists for students living in
public housing go well beyond matters of school funding.
The authors suggest that researchers and policy makers
should continue to examine the community environments
experienced by children and families living in public
housing to identify factors outside of local schools that
help to shape the observed performance gap.
Schwartz, Amy Ellen, Brian J. McCabe, Ingrid Gould
Ellen and Colin C. Chellman. (2010). Public Schools,
Public Housing: The Education of Children Living in
Public Housing. Urban Affairs Review. September 2010.
Can Financial Education Change Savings,
Investment, and Consumer Behavior?
Financial education for youth takes many different
forms, and it's still not clear which delivery mechanisms
and approaches work best. For example,
some proponents favor better base education at an early
age while others stress "just in time" education around
specific financial decisions. But can financial education
change financial behaviors?
Using a quasi-experimental approach, Bruce Ian
Carlin and David T. Robinson studied the impact of Junior
Achievement's Finance Park (FP) program on youth financial
decision making. The FP program typically begins with
classroom based personal financial management training,
followed by active participation in a simulation in which
students are assigned fictitious life situations and asked
to create household budgets for these roles. Carlin and
Robinson compared FP simulation performance among
students that received classroom training versus those
that did not receive classroom training. They found that
students who received financial literacy training were 35
percent more likely than their untrained peers to successfully
complete the budget balancing exercise. Students
that received financial education were also more likely to
make choices that are consistent with delaying immediate
gratification in favor of investing in longer-term outcomes.
Another finding was the impact of financial education on
the utilization of financial advice; students who had attended
financial training were significantly more likely to
act on "just in time" decision support that was offered
during the simulation. The authors suggest that this finding
indicates that decision support and financial literacy training
are complements, not substitutes.
While we still don't know which programs and delivery
strategies are most effective, these findings suggest
that financial education can lay a foundation for supporting
consumers in financial decision making. Further
research is required to better understand the interaction
between financial education and timely decision support.
Carlin, Bruce Ian and David T. Robinson. What Does Financial Literacy Training Teach Us? NBER Working Paper Series. Working Paper 16271.
Childhood Neighborhood Conditions and Adult
Research has demonstrated that the neighborhood
in which you live can have a profound impact on
your health. Residents of neighborhoods with high
concentrations of poverty tend to have significantly worse
health outcomes than residents of more affluent neighborhoods,
signaling the importance of "place." However, research
has tended to focus on the effect of neighborhood
factors on adolescents; the timing of these effects across
the life-span is less well understood. What are the long
term impacts of childhood neighborhood conditions on
health outcomes in later life?
Using 38 years of longitudinal data from the Panel
Study of Income Dynamics (PSID), Thomas Vartanian and
Linda Houser examined how neighborhood conditions
experienced in childhood, as well as adulthood, affect
self-reported indicators of adult health. Not surprisingly,
they find positive long-term health effects for growing up
in affluent neighborhoods. However, they also find that
those who grow up with low incomes relative to their
neighbors report better overall health as adults, suggesting
that growing up surrounded by comparative advantage
may allow children to utilize neighborhood resources to
their benefit. However, once they reach adulthood, the
effects of being "relatively deprived" are reversed; relative
inequality appears to have negative health impacts. Additionally,
Vartanian and Houser find some evidence that
the relationships between childhood neighborhood conditions
and adult health are stronger for nonwhites than
This research offers evidence that growing up in a
disadvantaged neighborhood hurts the long-term health
outcomes of children, particularly nonwhite children. The
authors suggest that further research should be done to
better understand how neighborhood factors affect longrun
health outcomes in order to direct policies and resources
to critical issues of health and well-being.
Vartanian, Thomas P. and Linda Houser. (2010). The Effects of Childhood Neighborhood Conditions on Selfreports of Adult Health. Journal of Health and Social Behavior. September 2010. 51(3): 291-306.