Will jobs fix the housing market or will housing fix the job market?

There is a lot of talk in the media today about the poor housing market and how an increase in employment would help bring the housing market back. However, the question is, will a recovery in the job market bring the housing market back, or will a recovery in the housing market bring the job market back?

Addressing this issue, is an opinion that came out today from RadarLogic that I found not only to be interesting, but a highly accurate assessment of the issue. In the RadarLogic opinion it is pointed out that during the housing boom, “a very large number of jobs” were created in the home building sector. Obviously many, if not most, of those jobs went away when the boom came to an end and then the housing market ultimately collapsed thereby, for the most part, ceasing construction of new homes. Unfortunately the short-term outlook is not good, as builders have to not only be concerned with the housing market, but also the competition created by distressed property sales in addition to the negative impact these sales have on home prices in general.

The RadarLogic opinion predicts that “sustained and robust job creation will not occur in the construction sector until the excess supply of homes is absorbed and homebuilding resumes in a sustained and robust manner. And even then, not all of the construction jobs lost in the great recession will return.”

RadarLogic feels that what is going on in the housing market, and home prices, is a “leading indicator to the US economy overall”, and I agree. The opinion states “among the reasons for this phenomenon is the correlation between Americans’ perceptions of their own wealth as expressed in the value of their homes and their willingness to recycle some of that wealth into our economy. So again, it seems to us that a recovery in housing values will precede a real recovery in our economy, spending, jobs and all.”

So rather than strong job growth driving a robust recovery in the housing market, RadarLogic predicts we will see slow absorption of excess housing supply and a slow stabilization in housing values eventually spur housing construction and consumer confidence, and in turn drive a recovery in jobs.

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