Housing Market and Jobs in 2011, What’s in Store?

With all the recent talk about U.S. unemployment rates and an unhealthy job market, there’s definitely some speculation on how high unemployment will impact the housing market in 2011.  Recently, the Economic Policy Institute released a piece discussing how the labor force is actually smaller than when the recession started, despite population growth.  They published the following graph which illustrates the trends in job losses and gains in all post-war recessions (yes, we are the Big Red Line called the Great Recession):

Below  are the California median housing prices for the same years from DQNews.com.  Coincidence?  I think not. There is a definite link between housing prices and job growth and it seems that until Americans have some cash in hand they are going to maintain some difficulty in buying properties. 

The question is whether or not this problem with job growth will continue. Several articles have discussed the impact of corporations sending jobs overseas.  Again, The Economic Policy Institute shows that American companies have created 1.4 million jobs OVERSEAS this year, compared with less than 1 million in the U.S.  Those 1.4 million jobs would have more than doubled our hires, and lowered the U.S. unemployment rate to 8.9 percent. 

With all but 4 of the top 500 companies reporting profits this year and the stock market close to its highest point since the 2008 meltdown, Americans should be seeing plenty of paychecks. But, we’re not. According to David Wyss of Standard and Poor, half of the revenue for companies in the S&P 500 in the last couple years has come from outside the U.S.!  Yes, that’s one-half, kids.

This is one factor affecting homebuyer purchase power.  There are several others, including foreclosure rates, credit and lending restrictions, and the actions of the Federal Reserve on interest rates (I’m crossing fingers on that one!), etc.  At this point, it appears we may be playing a waiting game.

In the meantime, housing prices are dropping again over the winter so for you potential homeowners this Spring may indeed be the time to get out there and take a look at what’s on the market. With a buyer’s market and low interest rates saving you thousands over the loan, buyers have immense bargaining power.  One thing I am noticing this winter is the absence of active listings here in the East Bay - so do not expect a flood of houses to choose from! What to look for when buying? Well, now, that’s for a future blog.