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It’s the Economy, Stupid!

The original thinking was that the economy wouldn’t come back until there was a recovery in the housing market. It now seems that most experts are saying that there will be no recovery in the housing sector until our economy comes back. More specifically not until we begin creating jobs.

But, when will that actually happen? Even if the economy recovers, will jobs follow?

Just last week, CNBC reported:

Investors were shifting into and out of positions as evidence mounted that we may be looking at a jobless recovery.

And this week Real Trends, the bible of real estate brokerage stated:

Unless and until unemployment comes down housing sales will be stuck well below normal rates given the interest rates and home pricing available in the market today.  Smarter experts than us have commented extensively on the relationship between employment, incomes and housing.  Now the facts bear this out.

With many economists believing that unemployment will only recover slowly (one group says the rate will be at best 8.5% in the fourth quarter of 2011) this level of housing sales should be considered the “new normal”.  While no one likes this news it should give all planners the ability to know with some certainty that there is likely no rescue on the way.

Calculated Risk has put together a great visual:

CR explains:

The graph shows the job losses from the start of the employment recession, in percentage terms.

The dotted line shows the impact of Census hiring. In July, there were 196,000 temporary 2010 Census workers on the payroll. The number of Census workers will continue to decline – and the gap between the solid and dashed red lines will be gone in a few months.

What does this all mean to residential real estate?

People can’t get a mortgage without having a job. It still might be some time before we return to a more normalized market.

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1 reply
  1. Maui Realtor Alex Cortez
    Maui Realtor Alex Cortez says:

    Without unemployment decreasing, the chances of long-term growth in the RE market are limited, at best. A few economists have been claiming that we hit the bottom and are on the way up, clearly that doesn’t take unemployment and the shadow inventory into account. Loving the CR graph, by the way.


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