For the eighth consecutive month, year over year job losses have increased in all 372 U.S. metropolitan areas, and many are concerned about the effect of unemployment upon housing for 2010. How do job losses relate to the recovery and, more importantly, to the coming year? As a lagging indicator, employment is said to follow the economy, so it’s logical that we not expect joblessness to decline until the economy is improving. However, while employment may follow economic trends, it is an important indicator of what we can expect in the short term; and the relationship to the housing market is especially important for those of us in real estate related businesses.
With more people out of work since the Great Depression, housing has struggled. Lenders in some areas have been so consumed by foreclosures that many of their customers remain in their homes more than a year after having stopped making mortgage payments. And requests for short sales have been overwhelming, with banks sometimes taking months to respond, if they respond at all. In many cases lenders have proceeded to foreclosure even after agreeing to work with a short sale.
We’re all aware that the housing boom is over; what some fail to admit is that it’s not returning—ever. We're faced with a new market that will require different tools and strategies. The old market that flourisned and grew into a housing bubble was created artificially, just like the “stabilization” of the market that has recently been declared. Five years ago we weren’t selling homes because the economy was experiencing explosive growth; homes were sold because we experienced an explosive growth in the availability of easy money. And now we’re attempting to stimulate the market in a different fashion. It won't work.
While the First Time Buyer Tax Credit added about 350,000 additional sales, those sales were purchased by the taxpayer for approximately $43,000 each. Even if the program is extended—and there are some indications from Congress that an extension of some sort may be in the offing—it will do little to restore a market struggling under the weight of enough foreclosures to equal more than a year of sales.
Jobs must be created; and when we see positive growth in the jobs numbers, we’ll begin to experience true stabilization. Until then, it’s best to remain lean and to work to define our piece of the “new economy.”
Source: Bureau of Labor Statistics
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