Fed: "House Lock" - Negative Equity not Hurting Employment Numbers

Assuming that all migrants who were constrained from moving due to negative equity were unemployed and seeking a job and that they would have found employment in the new state, the absence of house lock would have reduced the nation's unemployment rate by at most 0.10 percentage points annually between 2006 and 2009 or a rate of 9.0 rather than 9.3 in 2009.

Well, we'd say headline unemployment being 9.3% rather than 9.0% is significant (presumably, continuing this extrapolation, unemployment would be a full .6% lower today, which starts to seem like it's adding up to us...) But even assuming this is "minor", let's not forget that the alternative is just moving even when you are underwater and fail to sell, then simply defaulting on the old house, which is not a great alternative either. In sum, as long as huge percentages of people are underwater, it's a problem for policymakers.

One other thing the study neglects: a person doesn't have to be underwater to fail to sell their house in a down market. Most people will try to hold out for better price for a long time -- sometimes indefinitely.