According to a new research report from the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA), college-educated homeowners are twice as likely to leave the workforce after a job loss than renters. The divergence in behavior comes from the fact homeowners and renters respond in different ways to income and housing wealth disruptions.
College-educated workers are more likely to move after facing an income or housing wealth shock compared to those without a degree. However, if these college-educated individuals are homeowners, then they are significantly less likely than renters to move after facing an income or housing wealth shock. Instead, these homeowners are more likely to retire or leave the workforce altogether.
"Rising inequality has made looking at subgroups more important, because homeownership, employment, and other outcomes increasingly look very different by education and region," said Brian Asquith, author of the report and economist at the Upjohn Institute for Employment Research.
"Older homeowners and college-educated individuals are more inclined than renters to retire or leave the workforce after losing their job,” Asquith continued. “Older renters appear to be more reluctant than homeowners to leave the labor force in response to any adverse event, possibly because they are worried about paying for their rents in the future when they expect to be living on a fixed income. Unsurprisingly, this means that older homeowners, particularly those without a college degree, really seem to value having their homes as a bulwark against these same adverse events."
The report also found that job displacements from trade stocks and the Great Recession caused an 8% decrease in labor force participation among renters and a 16% decline among homeowners.
Since the 1990s, the older workers’ workforce participation has increased while their migration has decreased, confounding conventional wisdom. However, there is minimal evidence that older workers’ increased labor force participation or decreased retirement likelihood in response to disruptions in housing wealth.
“This research highlights both opportunities and downsides for the mortgage market. The college-educated share of older Americans is rising, and degree holders have higher homeownership rates. Meanwhile, both an aging population and rising regional inequality in home prices will continue to dampen migration, potentially hurting demand for new mortgages in some areas,” Asquith added.
Edward Seiler, executive director for RIHA and vice president of MBA's housing economics, said, "RIHA's study underscores the importance that homeownership and higher education have on financial stability and mobility for older Americans. Policymakers need to remember that geography and education influence how individuals respond to disruptions to their jobs, income, and housing wealth."
To learn more or find additional studies, visit the RIHA website: www.housingamerica.org
