Lock-in effect may not exist

Today a researcher put on his blog that the fact underwater borrowers have been locked out of moving to new jobs may be not true. It is highly recognized that the housing market has had a lot to do with the size and stubborn nature of the Great Recession. A lock-in effect for underwater borrowers was used to explain the inner relationship. A lock-in effect is the phenomenon that people could not move because homeowners are underwater borrowers and unwilling to face the costs. He said in fact , being underwater might lead people to feel liberated from their houses.

He argued with a done paper by by Yuliya Demyanyk, Dmytro Hryshko, María José Luengo-Prado, and Bent E. Sørensen that the most locked in homeowners are those that have only a small amount of equity in their houses. Those with lots of equity are more likely to move to another city than those with little equity when their local economies receive a positive employment shock, and very slightly less likely to move when their local economies received a negative shock. But those with negative equity are more likely to move under all circumstances. Perhaps such people feel like they have nothing to lose, so they might as well move.