Blame rising home prices for the Great Resignation, new research suggests

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Millions of people – particularly older workers – who quit their jobs during the pandemic did so because their homes had appreciated in value so much that they could afford to take a step back from the labor force, a new study concludes.

The working paper by researchers at the University of British Columbia, first published in February and circulated in late June, found a relationship between the increase in home prices and the decline in labor-force participation. It said the pandemic housing boom helped homeowners — particularly those in their 50s, 60s and 70s — to step back from work.

“High house prices allowed many older Americans to retire early; if not for the high house prices, their labor force participation in 2021 would have been similar to 2019,” the study stated.

After the pandemic came to a halt, millions of Americans decided to switch jobs or give up their job altogether, a phenomenon dubbed ‘the Great Resignation.’ 

The rate of job quits in the U.S. reached a record high, since the U.S. government started keeping count in 2000, the Bureau of Labor Statistics said in July last year.

The BLS attributes the sharp rise in quitting to “labor-market tightness,” or a desire for workers to protect themselves and their family from coronavirus, or due to workers being challenged by pandemic-related closures of childcare centers and schools. 

The Pew Research Center, on the other hand, attributed the Great Resignation to people feeling like their pay was too low, a lack of opportunities for advancement, and feeling disrespected at work.

But the University of British Columbia study had another explanation for why employees — particularly older ones — quit. It said it was because they could tap their homes for cash, particularly since they had greatly appreciated in value during the pandemic.

The median price of a resale property in the U.S. was $396,100 as of May 2023. In 2019, before the pandemic, the median price was $277,700. 

Matching labor-force participation rates between those in their 20s and up to those in their 70s, and home prices, the researchers found that when homes rose in value, homeowners participated in the labor market less. 

Particularly for people aged 65 — generally considered to be the age when people retire — the effect of stepping back from the labor force in light of their home value rising was significant, said Jack Favilukis, an associate professor at UBC Sauder who co-authored the study with Gen Li, a PhD student in finance.

Why do rising home prices motivate older homeowners to quit their job? The report said that higher home values meant people were “more able to take out home-equity loans or use reverse mortgages to access cash, while others might have downsized to a smaller home and ended up with a sizable nest egg.” 

Others may have “just felt richer, and more confident about stepping off the work treadmill,” the report added.

Aside from home prices jumping during the pandemic due to ultra-low mortgage rates and workers having the ability to work remotely, millions of homeowners also took advantage of ultra-low mortgage rates to refinance their home to lower their monthly bill.

But that has created a post-pandemic disincentive: many homeowners feel reluctant to sell as they would have to give up their low rate in exchange for a 30-year mortgage that’s nearly 7%. 

Lack of desire to sell has in turn created a problem of low inventory, which has limited home sales. Inventory is at multi-decade lows, per the National Association. of Realtors.

So don’t expect workers near retirement to continue The Big Quit, Favilukis said. People may not currently see their home as a giant ATM machine and, as a result, may stay in the labor market for longer.

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