Lower Migration . . .What About Origination?

Data shows that that the number of Americans moving has been on the decline in the past quarter century. Lower migration has meant fewer mortgage originations, but some of the effect on the housing market has been positive, according to analysis from the Urban Institute.

Fewer Americans moving has meant less turnover in the residential housing market, which has led to a lower volume of purchase loan originations, according to CoreLogic Deputy Chief Economist Sam Khater—but at the same time, it could potentially lead to fewer defaults. Since homeowners are moving less, it means they are living in their homes longer—which means they are building up more equity.

But while Americans moving less has resulted in fewer first-lien originations, it actually has the potential to increase second-lien originations, according to Bhargavi Ganesh of the Urban Institute’s Housing Finance Policy Center.

“Lower migration can also increase demand for second liens, as homeowners decide to renovate the homes they plan to live in for a longer time,” Ganesh said. “Decreased mobility could also decrease demand for mortgage products that minimize interest rate risks, such as fixed-rate mortgages or longer-term adjustable-rate mortgages.”

Data from the Federal Reserve shows that interstate migration has experienced a decline from almost 3 percent in the 1980s down to 1.5 percent in the five-year period from 2010 to 2015. While an aging population and a decline in the homeownership rate (which was at a 51-year low in Q2 this year), those two factors might not be to blame, since the interstate migration percentage has had a similar decline for all age groups and people who both rent and own homes.

Are Americans moving less because of post-crisis housing affordability issues or increased land-use regulations? Not likely. The Fed’s research shows that migration has dropped even in states with fewer land-use regulations and lower home values.

If it isn’t the aging population, low homeownership rate, or housing affordability, then why are people moving less? The labor market, rather than demographic or socioeconomic changes, is largely responsible for the decline in mobility among Americans, according to analysis from the Urban Institute.

Between 1990 and 2011, the number of people transitioning between jobs, occupations, or employers slowed, which corresponds with the decline in migration. The states with the largest declines in migration rates were the same as those that experienced the largest drop-offs in job transitions, according to the Fed. Since long distance moves are often job-related, this likely means that labor market conditions are causing the lower migration rates, the Fed reported.