Corporate Relocations Hindered By Slumping Housing Market (Investor's Business Daily)

The rough housing market is sending parts of corporate America into fits trying to hire, relocate and manage workers. It's spurring a change in methods.

In some markets, getting a prospective employee to sell his or her home and move is a tenuous proposition. Home sales are still falling quarterly in 35 states, according to the National Association of Realtors. The median house price has dropped by double-digit percentages from a year ago in several metropolitan areas of California, Florida, Nevada, Arizona, Illinois, Michigan, Ohio and Connecticut; it's also fallen in spots such as Denver and Boston, and in communities around Washington, D.C., and New York.

Forecasts for a declining economic growth rate this year don't help.

The housing mess is "the No. 1 problem in the relocation industry right now," said H. Cris Collie, chief executive of Worldwide ERC, a trade group for the industry. "What we don't know is the number of employees who are opting out of new positions because they can't get out (of current homes). That said, employees are still moving for relocation purposes, but it's a challenge."

It took corporate recruiter Rich Lishewski six months to sell his Seattle home when he moved to New York City, and he took a loss.

"I've moved all over the world, and this is the worst I've ever seen it," said Lishewski, senior director of talent acquisition for the National Basketball Association. "We recognize the financial burden of the housing market crisis right now."

More than 70% of respondents to a Worldwide ERC study released in August pointed to "slowed real estate appreciation/depressed housing market at the old location" as the reason their employees are averse to moving. This is up dramatically from last year, when only 16% of respondents mentioned it as a reason for reluctance to relocate.

Change Gets Costlier

Corporations also are swallowing a much bigger pill in terms of expenses to move an employee. These costs, including any loss-on-sale assistance, rose from a national average of $49,726 in 2005 to $91,295 in 2007, according to the study.

Housing difficulties have "reduced the pool of candidates available for new positions," said Ross Grossman, vice president of human resources at Tarrytown, N.Y.-based Regeneron Pharmaceuticals (NasdaqGM: - ). "And the process of relocating is more stressful and frightening for those who are willing to move."

"The housing market drives everything, so if that slows down, that slows down hiring," said Paul O'Leary, vice president of the Move Management Center, a San Mateo, Calif., firm that helps corporations manage relocations.

Some bigger companies hungry to hire or transfer provide compensation for the loss an employee suffers on the sale of a home, he says.

"Some of those policies have been on the books for 10 to 15 years and haven't had any use," he said. "But now they're coming into play again."

However, John Challenger -- chief executive of Chicago-based consulting firm Challenger, Gray & Christmas -- says he believes more companies have "clamped down" and aren't picking up housing losses, except for executives.

Employees whose firms are offering home sale assistance, and potential loss compensation, face new scrutiny on home selling. In some cases, companies are asking employees to choose a real estate agent from a vetted list. And they have new requirements about how an employee sets a home's listing price.

"Corporations are requiring much more information ... in some cases a market analysis and price from two different brokers ... and then the employee must list the home for sale within a certain percentage of those two prices," said Marge Fisher, a relocation management consultant in Riverside, Conn.

Another difficulty, O'Leary says, is that the IRS requires that employees move within a year of their start dates for some relocation expenses to be tax-free.

Not all employees let go of their old homes.

Fisher says that a lot more people aren't selling, but instead are renting their old houses out and hoping the real estate market will improve. But she thinks this trend may cause trouble for companies down the road.

"If you've got a foot in the old community, there's the issue of how well you're going to acclimatize," Fisher said.

Settling in can be even more tenuous if a new or relocated employee decides -- perhaps out of necessity -- to rent instead of buy.

Employees who take a loss on a home at their old location may not have the down payment to buy a new home. Some relocating workers may lack the credit standing to get a good loan, at a favorable interest rate.

Stuck In Tough Spots

In this scenario, "the company can't do much," said Eugene Isaacs, a senior vice president with Lexicon Relocation of Jacksonville, Fla. "So some employees are becoming renters in the new location."

The housing crisis is creating other human resources dilemmas.

"Some companies are having to counsel employees on foreclosure troubles," Challenger said. "They're having employees come to them and say, 'Can you lend me $10,000 to help me make my payments on my house?'" He says firms are having difficulty figuring out appropriate responses in these situations.