This is old news nationally, but I can confirm that locally, we're seeing a definite impact of the mortgage meltdown on our candidate pools for national searches.
For new faculty, it isn't so bad, since so many new faculty were renting wherever they were before. But for administrative positions, it's getting difficult to get people from outside the area, since they often can't sell their houses, or fear that they can't, or can't get enough for their houses to make the move possible. And community college salaries generally don't come close to making up for lost equity.
The two-body problem is nothing new; now we're starting to see a two-house problem.
People deal with the two-house problem in different ways. Without betraying any confidences, I'll just say I've seen three ways up close, all of them problematic.
One is just to move, and try to sell the old house from a distance. This is remarkably difficult. It's hard to maintain a property from a distance, and paying a mortgage plus rent (or two mortgages) is no small thing. I suppose one could always try to rent out the old house, but that would presume that you wouldn't need the equity from the sale for a down payment on a new one, and/or that you're willing to move twice in short order, and/or that you know exactly when the house will sell, and/or that you can find trustworthy tenants who won't sabotage your attempts to sell. It could work, but the chain of 'ifs' involved is intimidating.
Complicating matters, the store of 'personal days' and 'vacation days' and suchlike is typically lowest in the earliest days on a new job. But that's when they're most needed for the return trips to try to sell. Taking unpaid days while paying for two homes (and transportation between them) is not for the faint of heart.
Alternately, one could simply sell the old house for whatever it will fetch in short order, eat the loss, and move. I think of this as the fiscal equivalent of ripping off a band-aid – it hurts in the moment, but the moment passes and you move on. This can work, but it presumes that you have the cash on hand to survive the loss. It also presumes a home situation in which burning that much cash doesn't cause a major family crisis. ("Honey, we need to wipe out our savings to move. I'm sure you'll find a new job once we get there. And the kids can make new friends." Nope, no stressors there.) And, non-trivially, it assumes that both you and your buyer can actually get mortgages. That used to be a no-brainer, but not any more.
Finally, one could simply not move. Judging by the recent candidate pools, that's becoming a popular strategy. Of course, not moving is a decision in itself.
From an employer's perspective, decreased mobility means fewer good candidates available for any given search. Worse, the losses are asymmetric in the sense that they increase with distance, so it becomes progressively harder to get folks who aren't already part of the small local world.
A few years ago I noted that the rapid increase in house prices meant that we were having a terrible time recruiting candidates from outside the area, since our salaries didn't keep up with what it cost to live here. Now we're getting a similar effect from the other side; with house prices plummeting, they can't afford to leave their current posts to come here. In both cases, the real problem is rapid and drastic change, rather than the direction of change. Over time, we could adjust to slow and steady change in either direction; it's the whiplash that gets ya. (Of course, a slow and steady downward slide has a nasty effect on the local tax base, but that's another issue.) Volatility is a problem in itself.
Historically, one of the ways that we've honored the goals of 'hiring the best' and 'diversifying the college' has been to cast a wide net in our searches. (I fully embrace this strategy, btw.) Put the ads wherever we can, and hope that a large enough pool for each position – multiplied over enough positions – will allow us to achieve both goals. To the extent that the real estate follies shrink the pool of truly available candidates, both goals become harder. A pool more heavily weighted toward local candidates will be less diverse, and a smaller pool will probably have fewer big fish in it. Instead of hiring the best people who are currently looking, we'll hire the best people who are currently looking who are renting, or who are already local, and who have great credit scores, and who don't have a two-body problem. That's a smaller group from which to choose.
I suppose a really wealthy institution could use signing bonuses to compensate for lost equity, but my cc simply doesn't have that option. (Try selling that to the taxpayers!) So instead we just hope against hope that the damage won't be too bad, and that the market will stabilize enough soon enough that people will consider moving again.
Over the long term, there's something to be said for the 'grow your own' school of management – if you develop your own people enough, the theory goes, you don't have to recruit so many. But you won't diversify that way, and people's development timelines don't always coincide with openings. It's great to have a young hotshot in the comptroller's office who might be ready for a VP position in a few years, but if you need a new VP right now, it really doesn't solve your problem.
Have you seen something like this at your college? Have you been caught in this situation? Is there an elegant solution I'm missing?