The question I'm posed most often in my daily travels is, "When will the Louisville real estate market rebound?" Here at Insider Louisville we like to delve a little deeper and take a look behind "the curtain" and see what we can find. Many were surprised when we brought you salary estimates for local real estate agents. Using these numbers, we can estimate that the average real estate agent in Louisville made $27,364 before taxes and expenses. People I spoke with were astounded. I think most readers were also surprised to learn about unemployment owning the key role in Louisville home sales even while other factors' influence (like interest rates) was less. This is where today's story begins.
The former "Big Three" real estate activity gauges
Traditionally, three things influence activity in real estate: inventory, rates and prices. We'll cover the current position of each.
- As of this moment, there are 9,619 active listings in the Greater Louisville Association of Realtor's database. This is a couple thousand higher than is typically the case. Keeping score at home, "Lots of home choices?" Check!
- Mortgage interest rates are lower than they've been since 1975. "Low cost loans?" Check again.
- Historically, Louisville home values are slow but steady. Coming in at 3 perecent to 4 percent appreciation annually, buying a Louisville home is a very safe investment. That is, until the end of 2008 when home values actually declined for the first time in decades.
Home prices have been leveling off (for the most part) so looking again at our Big Three scorecard, "Are home prices lower than average?" Once again, check. So, why aren't homes selling?
Where is the Louisville unemployment number heading?
Now I don't claim to be an economist (or fortune teller), so when I come across a topic where I'm clearly not the subject-matter expert, I look for someone who is. Time Magazine did a piece earlier this year entitled Where the Jobs Are: The Right Spots in the Recovery that highlighted some of the difficulties certain employers were having finding qualified talent. Here's the portion that centers on Louisville.
General Electric is also trying to poach some Motown engineers to staff its expansion at Appliance Park, in Louisville, Ky., and three other locations where it is establishing "centers of excellence" in refrigeration technologies. The company is in the middle of a $1 billion investment in its appliance sector that will create 1,300 jobs (emphasis added) at all levels over the next four years.
There's one local employer looking to improve our unemployment rate. This was reinforcement by a piece Terry Boyd wrote here on Insider Louisville, that highlighted GE's commitment to Appliance Park. A national organization that looks at many data points to assess a city's business and financial climate is Moody's. Their employment growth rank for Louisville is 55, where 1 is the best and 392 the worst. That's quite encouraging as well! Lastly, an article published in the Indiana Business Review by Uric Dufrene makes this statement about Louisville's 2011 outlook as it pertains to job growth.
Overall, the outlook for Louisville is a resumption of economic growth and employment, with a more favorable view now to the upside. We will not return to full employment, but 2011 will be the year where we begin to make noticeable progress on the recovery of lost jobs.
Conclusion
If unemployment numbers influence real estate transactions in a substantial way, as I believe they do, these indicators all predict that home sales are about to increase. The measure and degree are still up for debate. Louisville home buyers won't wait on the sidelines forever.
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