Real Estate - The Relationship Between Housing and Jobs
The Great Recession is officially over based on a technical analysis by economist. For the rest of us, it feels like it is still here front and center. The biggest issue at this point is the status of the job market. This is particularly important when considering the relationship between the housing market and employment.
It has been a very long time since we've seen unemployment in the ten percent range. To be honest, this figure is very misleading. The real employment situation is much worse. The current calculations only consider people who have been unemployed within a certain time span and excludes everyone beyond that. The second mislead factor is the fact that anyone who is working part time is considered fully employed. While this is fine when considering college students working their way through school, it is misleading when considering the father who lost his full time position and is working at a part time job to try to make ends meet.
The relationship between housing and jobs is a fairly logical one. When people have steady paychecks, they buy homes. People who are barely getting by or don't have steady paychecks simply don't buy homes. They can't! This simply logic leads to a staggering result when you consider that the "real" unemployment in the country is estimated to be in the 15 to 20 percent range. That equates to roughly 20 million working adults who...well, aren't working.
There are only so many people that are in the social position in society to buy a home. While there are 300 million people in the country, the pool of potential homebuyers is much less. Nobody is really sure of the number, but what is apparent is removing 20 million or so from it is a major slice. This effectively reduces demand and, in combination with the banking fiasco, leads to a situation where home prices plummet. In short, exactly what we are seeing across the country.
The relationship between real estate and jobs is a straightforward one. When job data is strong, real estate sales are as well. When it is not, real estate sales are not. With this in mind, make sure to keep a close eye on job data in your area since it is a predictor for the real estate market.