What jobs mean for housing this spring
Whether you're thinking of buying or selling a home this spring, the last three monthly jobs reports could help you make up your mind. As more Americans find work, home sales will increase and home prices will stabilize at a much faster rate.
"More jobs help promote more housing demand," said Frank Nothaft, chief economist for Freddie Mac. "It can be a great opportunity to be in the market -- depending on where you are living."
However, experts warn that a full housing recovery, with strong growth in prices, could still be years away. "We are looking at a flat market -- maybe 1 percent growth in housing prices over the next year," said Jed Smith, Ph.D., managing director of Quantitative Research for the National Association of Realtors (NAR).
The job numbers
According to the U.S. Department of Labor, the nation's economy added 227,000 new jobs in February, and employment reports in December and January were revised upward, totaling 734,000 new jobs over the last three months.
The unemployment rate remained unchanged at 8.3 percent, its lowest level since early 2009, as thousands of workers who had left the job market became encouraged to look for work again.
Economists like Smith are quick to emphasize the slowness of this recovery. Despite the presence of positive job growth over the last few months, the experts agree, we are still not at a point where employment is driving our recovery.
A lot is riding on job creation
Since the U.S. population continues to grow, we must add about 150,000 new jobs every month just to keep the unemployment rate from rising, says Smith. In February, that only left 77,000 new jobs to help the roughly 10 million people now unemployed or under-employed. At that rate, it will take years for employment to get back to a normal level.
Likewise, combined over the last two years, new and existing homes sold at a rate barely above 4 million a year, well below the peak of more than 7 million, and still below the 5 to 6 million in more normal years.
New-home construction and rising home prices have led economic recoveries in the U.S. since World War II. Yet those two factors are less likely to lead the way this time around, given the large number of unsold homes already on the market. New jobs are what will eventually translate into recovery, experts say.
Home prices: the last to recover
"Home prices are the last thing to turn around," said David Blitzer, chairman of the Index Committee for Standard &Poor's. As of December, the S&P/Case-Shiller Home Price Index was at its lowest level since 2003.
The millions of homes in foreclosure or at serious risk of foreclosure are a heavy weight on home prices. For years now, roughly a third of all homes sold have been foreclosed properties or properties sold by banks in short sales, according to NAR.
The problem isn't going away.
"There is a pile of bad loans," said Daren Blomquist, vice president at the foreclosure data firm RealtyTrac. He says that the homes already seized by banks would take 17 months to be sold, given the current slow rate of absorption and not counting any new foreclosures. "The foreclosure problem is not going to just go away overnight," said Blomquist.
Obviously, if more homeowners keep their jobs or find new ones, fewer will be in danger of slipping into foreclosure and the backlog of foreclosed homes already on the market could find buyers more quickly.
Job market speaks to both buyers and sellers
The recent job numbers carry important information for both homebuyers and sellers this spring.
For those thinking about buying a home in the coming months, the job numbers are telling you that home prices won't be rocketing up anytime soon. Low home prices in addition to low mortgage rates will keep affordability levels near all-time highs. For sellers, the recent reports suggest that home prices are stabilizing, unlikely to fall much further, meaning more prospective buyers are on their way.
Bendix Anderson has covered the housing and mortgage markets for more than a decade. His work has appeared in City Limits Magazine, America Online Housing Watch, Habitat Magazine, Affordable Housing Finance Magazine, Apartment Finance Today, ProSales Magazine, Sustainable Communities Magazine and Multifamily Executive. Anderson has been nominated for awards in publishing and journalism.