US workers saddled by houses that won't sell
Soft real estate markets hurt worker mobility as relocation gets more costly – financially and emotionally.
When Patrick Greenish accepted a job offer as an art director in Charlotte, N.C., last July, he assumed that his house in Orlando would sell quickly. His new employer offered to let him telecommute for a month until the sale was complete.Skip to next paragraph
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But when the month ended, the "For Sale" sign remained firmly planted in his front yard. Even so, the company expected him to be working in Charlotte.
"I had to leave everybody at home while the house was still on the market," Mr. Greenish says, referring to his wife and two young daughters. "It was a bit hard on everybody."
That kind of challenge is becoming more common as a soft housing market is changing the landscape of relocation. Some potential employees are turning down new jobs or transfers they cannot sell their house or would have to take a heavy loss. And companies that offer relocation benefits are spending more for employees' moving expenses.
"It's costing companies an exorbitant amount of money to cover the loss on sale to get an employee moved," says Andrew Drescher, a relocation consultant with Relocation Benefits in Vienna, Va.
Many Fortune 1000 companies typically pay closing costs, he says, as well as giving employees payment for money they lost by selling their house quickly. But small firms often cannot afford that. "It's greatly affecting the ability of smaller companies to recruit top talent out of higher-priced markets," Mr. Drescher says.
As transferees or newly hired employees wait for their homes to sell, many are spending more time in temporary housing, disrupting family life. A few years ago, the average stay was 48 days, says Mindy Pauley, global account director of BridgeStreetWorldwide, a temporary housing provider. "We're seeing that figure increase because of the inability to dispose of a house."
For months Greenish lived in a rented room in Charlotte, returning home every other weekend. The price on his house continued to drop.
"The profit was just going away," Greenish says. "We started questioning our decision to move. It was getting harder and harder – the financial issues of living in two places, traveling back and forth, and the general strain on a marriage."
The publishing company that hired him offered Greenish no relocation reimbursement or buyout of his house.
"That seems to be the trend now," he says. "If the company is actively recruiting somebody, or it's a high-level job, that's a different thing. But a lot of companies aren't ready to absorb relocation costs anymore."
He tells of a neighbor, an architect, who received only $1,000 from his new employer to move from Denver to Orlando.
In 2006, the average cost to transfer a current employee who owns a home was $64,235, according to Worldwide ERC. For a renter, the cost was $18,736. Moving new hires costs a business less.
In areas such as Florida, companies typically pay $2,000 to $3,000 a month for a furnished two-bedroom executive suite, Drescher says. In San Diego and San Francisco, monthly costs average between $3,000 and $5,000.
Moving companies hurt, too
Moving companies, too, are feeling repercussions. "We're dealing in a fairly soft market," says Ron Martin, regional sales manager for United Van Lines in St. Louis. "Business is based on corporations needing people."
Some companies are avoiding or postponing moves by turning to telecommuting. "It's a lot cheaper to set them up in their home with all the tools," Drescher says. "The Internet provides the ability to perform the same task that they would at a bricks-and-mortar location."
For families, the current housing market raises complex questions. "It's not as simple as, 'Hey, honey, I have a new job, we need to move,' " says Jim Lanzalotto, vice president of Yoh, an outsourcing firm in Philadelphia. "Now you have to evaluate whether it's worthwhile to make the change."
He calls the current slump "unprecedented" and "nondiscriminatory," because it stretches across the country. Previous slumps were more regional, he says.
Some transferred homeowners are taking a wait-and-see approach by renting. Drew Marich, general manager of rent.com, notes that traffic on his apartment-rental site is up more than 20 percent from last year. He has rented out his own home near San Francisco and is renting a home in Los Angeles. A friend of his plans to sell his home in San Francisco and rent in Palo Alto, Calif., where he's taken a new job. His employer will subsidize the rent.