May 19, 2022 • By Keith Giles
Professor Ed Coulson, Director of the Center for Real Estate of the UCI Paul Merage School of Business, wanted to examine real-world results to see if homeownership helps or harms a person’s opportunity to advance their career. “As a real estate economist, I’m naturally interested in homeownership and people’s personal experiences with real estate,” says Coulson. “But I also have a long-standing interest in the relationship between homeownership tendencies and labor market outcomes.”
To examine the connections between people’s career paths and how it impacts their decisions to be a renter or a homeowner, Coulson teamed with fellow researchers Walter D’Lima of the College of Business at Florida International University and David Jinkins of the Copenhagen Business School, Denmark. The study’s results, now available in the article “Job Match and Housing Tenure” and published in Real Estate Economics, revealed more than a few surprises.
“People always hear the advice—and it’s good advice—that you probably shouldn’t buy a house to live in unless you make sure that you stay in the house for an extended time,” says Coulson. “Because those fixed costs are very expensive, and it’s a good idea to give yourself the time to pay those off. That means you want to ensure you have a job that you stay in for the benchmark of at least five years.”
As good as this advice might be, Coulson and his team wanted to know if owning a home limited job opportunities and, if so, how. “This study was a natural segue from my previous research in the relationship between people’s labor market experiences and the homeowner experience,” says Coulson.
Roughly 15 years ago, there was some suggestion that homeowners do worse in the job market precisely because owning a home prevents, or limits, changing jobs outside a specific geographical range. “The thinking was that you’re stuck in one place, and your job searchability is quite limited,” says Coulson. “The theory goes that, because of these factors, homeowners would have lower-paying jobs and less opportunity for advancement. But this is not the case, and it turns out that homeowners are not more unemployed or have less job opportunity than renters.”
Still, Coulson and his fellow researchers wanted to investigate the connection between homeownership and job stability—especially once they realized that no one else had done so academically. “Some research looked at military and college faculty who have a higher risk of moving in a short amount of time,” says Coulson. “But we felt that wasn’t relevant to the broad majority of people.”
Coulson’s team needed to determine if any previous research had asked how stable people are in their jobs.
“We found a previous research article that suggested that people whose annual salary was close to the average annual salary for that classification were much less likely to change jobs over the next year,” he says. “We found that you’re more likely to change jobs if your salary was below the annual average.”
The real surprise for Coulson’s team was that this volatility was similarly true for those whose average annual salary was above the average.
Coulson and his team found that homeowners were also more likely to be better matched to their job—they were earning the average annual salary of someone else in their same market. Conversely, if they were a renter, they were more likely to be poorly matched.
“Looking at a cross-section of people, if they were a homeowner, they were a better match for their jobs, while renters were a relatively poor match for theirs,” he says. “More importantly, we looked at renters and asked, ‘If you change jobs or in some way become better matched to your job in the sense that your wage was near the average, did that impel you to cease being a renter to become a homeowner in the next year?’, and that turned out to be the case. Bottom line, the better matched you are to your job, the more likely you are to become a homeowner.”
What’s the big takeaway? For Coulson, the answer is simple: “I think it’s just confirmation that people are not idiots,” he says. “Which is always a helpful thing.”
This research speaks to whether homeowners are stuck in their roles. Coulson and his team discovered that the answer is “no,” as he explains it: “We know that homeowners have greater seniority in their current jobs. Previously we might have assumed that this was true because they’re stuck and to search for a new job and move away would be too expensive. But that’s not the reason at all. Our research shows that homeowners have greater seniority because they’re well-matched to their jobs, and they want to stay where they are. So, it’s not that they can’t change jobs—they don’t want to.”
“When it comes to practical applications, I believe our research shows us two things. First, people aren’t stupid. It also suggests that homeownership is a very expensive proposition, and people don’t enter into it lightly.”
Edward Coulson Professor of Economics and Public Policy in the Paul Merage School of Business at UC Irvine, where he is also director of the UCI Center for Real Estate. Prior to his arrival at UCI in 2017, he was Professor of Economics and King Faculty Fellow in Real Estate at Penn State, and then Director of the Lied Institute for Real Estate Studies at UNLV. He is co-editor of Journal of Regional Science, and in 2016 served as president of the American Real Estate and Urban Economics Association. His co-edited book, Energy Efficiency and the Future of Real Estate was published by Palgrave Press in 2017.