Housing slump pressures workers, employers

CINCINNATI (Reuters) - Defaults on subprime mortgages and sliding home prices may have grabbed the headlines in the U.S., but the glut of homes for sale is making it harder for workers to move in pursuit of jobs and is worrying employers.

It comes as no surprise that job loss can cost homeowners their house. Together with rising interest rates, unemployment is cited as a leading cause of mortgage default, particularly in America's industrial heartland.

But corporate recruiters fear the slumping U.S. housing market could also turn the equation on its head. Home ownership may now prevent workers from accepting a new job, because selling a house may mean losing money.

"Companies are increasingly concerned," said David Barlow, senior vice president of SIRVA, a relocation company used by some 350 companies to transfer employees or lure new workers from one city to another.

"Companies need to hire the right individuals regardless of what housing markets are doing. In a market like today ... companies are faced with increased challenges to get employees to take moves," Barlow said.

While the national jobless rate was just 4.5 percent in February, the regional picture varies, and competition for skilled workers can be stiff.

Until a year ago, rising house prices and eager buyers made it easy, even profitable, for many workers to sell their house and relocate to another job.

But Barlow said employers are now scrambling to upgrade their relocation policies to help workers sell their homes in a weak market. More of his clients are now offering to cover the costs of workers who lose money on a home sale.

"It's an absolute nonstarter for a company to expect an employee to eat a fairly significant amount of money on a home sale," Barlow said. "(Relocation) policies are now more liberal and more costly than they were three or four years ago."

John Challenger, head of employment outplacement firm Challenger, Gray & Christmas, said that while America's near-record 69 percent home ownership rate has been lauded by politicians, few considered the impact a less-flexible workforce could have on the economy.

"When you're renting you're more fluid, but we've been moving more and more people into home ownership -- it's been a national goal. But there are problems with it," Challenger said. "The economy doesn't operate as efficiently, and that's what we're now beginning to see."

EVERYBODY WANTS TO SELL

The problem of homeownership and hiring is even more acute in areas of high unemployment, including states like Michigan, Ohio and Indiana, where a slump in the auto industry has thrown many out of work.

While it might seem easy to lure unemployed workers in a lousy job market to another city, the exodus of laid-off workers in cities like Detroit or Cleveland has torpedoed the local housing market, making it difficult for homeowners to relocate for a new job.

"In a market which has seen minimal appreciation, which is largely the case for Ohio, moving someplace to another market -- whether it be Florida or California or other places that have seen more appreciation -- makes housing unaffordable," said economist Ken Mayland, president of ClearView Economics near Cleveland.

"That can thwart any kind of adjustment or upgrading of a career."

Danielle Lazor, a credit counselor at the Family Service Agency in Youngstown, Ohio, said job loss causes most of the foreclosures she sees in her daily work. The northern Ohio city has been devastated auto plant cutbacks.

While many clients are not willing to move to find another job, as family and community keep them tied to the area, even those willing to leave cannot, Lazor said.

"They saw a big booming time and big slowdown, and now they are definitely more reluctant to put their home up for sale, because they are concerned with taking a loss," Lazor said.

It's a problem she has faced herself. When Lazor's husband was recently offered a job in Canton, about an hour away, they considered moving. But with little chance of getting a good price for their home in slumping Youngstown, the couple decided to stay put near their family.

Challenger said laid-off workers face a double whammy: they can't afford mortgage payments, and can't afford to sell their house because the equity they've built up will be lost if they sell into the market slump.

"People get stuck with homes now worth less than they were when they bought them, and they can't get out of them," Challenger said.

"Some can't even make the payments if they've lost their job -- and they certainly can't take a $50,000 hit selling the house for less."