Corporations, especially in these globalized times, are geographically diffuse beasts.
Let's dust the academic snobbery of those words and restate them: companies operate in a lot of different areas.
Therefore, they commonly move their employees around the country (and the world) in an attempt to capitalize on efficiencies and the unique skills of specific employees. Northwest Airlines employees may be asked to move from the Minneapolis hub to the Detroit hub, or vice versa. A Best Buy employee may head to the U.K. to coordinate the launch new superstores on foreign shores. Corporations the world over rely on this flexibility and mobility.
But recently, the declining housing market and accompanying falling property values have put a crimp in this process. How can one of the employees from either of the scenarios above actually make the move if the house they currently own isn't worth the amount of money they owe on it? Or it takes over a year to sell because of a slow market, necessitating two mortgage payments and a hemorrhaging negative cash flow?
The result is less flexibility in the world of corporate strategy, as the geographical mobility of any corporation's most prized asset—its people—is hindered. The Washington Post recently dug in to this issue:
"A survey last year by Worldwide ERC, a nonprofit association that represents relocation specialists, found that depressed home values emerged as the No. 1 reason for resisting job transfers for the first time in more than 10 years.
Of the member organizations that reported employee reluctance to move, 71 percent cited the sluggish real estate market as an impediment to a job-related move, up from 16 percent last year."
Click here for the full article. And click here to read one from the Houston Chronicle on the difficulties that Houston companies are facing in extracting promising employees from their mortgages in other parts of the country.
Just another reason that the Federal Reserve's claim in 2006 that the troubles in the housing market wouldn't spillover into the general economy seems either a) uninformed or b) willfully rose-colored, in hindsight.
Hat-tip to Calculated Risk.
