Unit 2 and 3 Practica Home Ownership

High rates of home ownership are bad for the economy. Discuss

It has been argued that rises in the rate of home ownership can increase the rate of unemployment.This is because home ownership appears to make people more reluctant to move in order to find work. Spain is an example of a country where high rates of home ownership coincide with high unemployment, however Switzerland demonstrates the opposite. This theory remains controversial. It is clear that other factors, such as the liquidity of the housing market, must play a role in the relationship. 

This theory was lent support by the performance of the housing market in US states such as California and Florida during the recession of 2007–9. These states had all experienced a major housing boom during the 1990s. But after the start of the recession the rate of house moving declined steeply. It seems that one factor in this problem was the number of households in negative equity. Having negative equity means that a house would be sold at a loss. Therefore a recession may be deepened if labour becomes more static, as a result of high home ownership rates.