ECONOMIC OUTLOOK Over twenty years of proven expertise and trend analysis in evaluating residential property values. |
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To help our customers better understand current market conditions and projections, Local Market Monitor provides periodic analyses of national economic trends and their impact on real estate markets. This analysis, developed by Ingo Winzer, reflects his view on the current outlook for the national economy. Economic Commentary: Jobs and Home SalesNovember 10, 2009 How can we have an economic recovery if unemployment is increasing? And what does it mean for housing markets?
An unemployment rate of 10.2 percent is a strong psychological impediment for anyone thinking of buying a house. Unless you're rich, the nightmare that YOUR job won't exist and that YOUR mortgage payments won't be met, will deter many would-be home buyers. What matters is not so much that the unemployment rate is historically high, but that it's been INCREASING.
Housing markets respond as much to psychological factors as to economic ones. That's why we had a price bubble in the first place. So we won't see much of a pickup in home buying until the unemployment rate has turned downward.
And quite aside from psychology, the economics remain poor. Most importantly, consumers are still heavily in debt. In previous cycles, housing demand didn't reappear until new jobs were created AND consumers debt had been reduced substantially. So far, consumers have shed a modest 4 percent of a very large pile of financial obligations. Bigger cuts will be needed before spending on new homes can take place.
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