How Owning A Home Could Hurt Your Job Prospects

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Is it possible that when you buy a home, you are hampering your future job marketability?  In Wall Street Journal’s Real Time Economics, “Do Rising Homeownership Rates Lead to Higher Joblessness”, they say how this can be true.  The economic study by Dartmouth professor David Blanchflower and Warwick professor Andrew Oswald said,

“It suggests that a doubling of home-ownership in a state would be associated in the steady state with more than a doubling of the unemployment rate.”

While that sounds odd, here’s the reason why.  When a family purchases a home, that makes them less mobile.  When stuck with large mortgage, it’s not easy to leave town for brighter prospects elsewhere.  Therefore if you are living in an area where job prospects are not bright, then it might be harder to move to an area with better job opportunities.

So does that mean that one should not consider buying a home?  Of course not, it’s one of the more reliable vehicles to building wealth.  However, we do need to be choosy about the area where we locate to.  Ask yourself these two questions:

  1. Do you live in a seller or buyer market?
  2. Are your current job skills a match with the local labor market?

For question 1, if you live in seller’s market, then it will be relatively easy to sell your home at a higher price than you paid for it.  Assuming that you have enough equity in your home, then your labor mobility is good because you probably will have enough money to cover your mortgage with enough resources to finance moving expenses.  Go ahead and buy a home in that area.

If you live in a buyer’s market, then that means you are likely going to sell your house at a lower price than you bought it.  In that case, your labor mobility is poor and it will be difficult to move without significantly hurting your finances.  Be cautious about buying a home and continue renting.  You might want to research other more favorable markets to move to.  Consider this an opportunity to increase your savings, so that you can put down a larger down payment.

For question 2, if you were to lose your job tomorrow, how confident are you that you will find another job with similar pay in a reasonable amount of time?   If you believe that you can find another good job quick, then it’s time to contact your local realtor and search for that new home.

On the other hand, if you feel very vulnerable and believe that you will have to take a significant cut in pay, then it’s time to reassess.  The best time to look for another job is when you have a job.  Spruce up your resume and do your research.  Is there another part of the country where your skills are better appreciated?  Consider reading the Bureau of Labor Statistics’ Occupational Outlook Handbook as a guide to whether your current occupation is in high demand.  Then network and find where there is great demand and consider moving there.

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2 thoughts on “How Owning A Home Could Hurt Your Job Prospects

  1. Based on this ‘thinking” about how owning a home would affect the job opportunities the same thing could be said about getting married. Should one limit their employment opportunities to the same market as their spouse? In fact should one decide not to start a family because where they are employed does not have good educational opportunities. More important question is, is this job market in the right ZIP CODE. What is the most important factor for your quality of life? Is your job more important than the kind of relationship you want with a potential spouse. All of these cannot be considered independently.

    So yes, buying a house, getting married, having children, can all lead to limiting your job opportunities, keep you in a job you really don’t want, or keep you from taking a job you really would prefer to have. So yes, it all can lead to unemployment.

    • Basically, I think Americans should be more cautious about owning a home. Wait until you’re stable, then think about it. There is nothing wrong with renting, as long as you’re building up your savings.

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