Home prices and unemployment

Location, location,location....this used to be the three most important words for real estate value...now it may be jobs, jobs, jobs.

IMHO, the governments compiling and releasing, and television news' subsequent spinning of the (un)employment figures is as slanted as the National Association of Realtors economists recommendations in 2005 that it was a good time to buy.

It makes basic, undeniable sense that if people do not have jobs, they can't:
a) buy a house
b) pay for the mortgage on the house they own

But, it's not the "unemployed" figure that is important (or accurate) but the "no longer looking for a job",  "under-employed" AND "employed but not making any money" figure is what the bigger problem is today!

An exodus of discouraged workers from the job market kept the U.S. unemployment rate from climbing above 10 percent in December. Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4 percent...about 1.7 million Americans opted out of the workforce from July through December, a Labor Department report showed. The share of the population in the labor force last month fell to the lowest level in 24 years. So eliminating almost 2 million unemployed from the reported figure was pivotal in keeping the reported rate down.

The "official" jobless rate when including the so-called underemployed -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- rose to 17.3 percent in December. Also, NOT included in that 17.3% figure are the "officially employed" (business owners, self employed, commissioned sale people) but making no money, or much, much less money than before. I personally know many General Contractors, self employed construction industry tradesman, mortgage brokers, real estate agents, and many, many business owners or independent sales professionals whose incomes have declined to zero or may even be coming out of pocket/savings to keep their businesses open...these people are not counted in ANY govt. reported employment figure.

The flip side of the jobs problem is the foreclosure problem...the foreclosure problem will lag the jobs issue by a year or more...Think of it this way: people lose their jobs or suffer a reduction in income, they don't immediately stop making mortgage payments-they try to keep up as long as they can...then if they finally decide that they can no longer keep up with the mtg, the banks are taking a long, long time to foreclose (which is the subject of another post to come). So...contrary to the rosy picture being painted, we have an uphill climb in regards to home values.

But...as a result of the current govt. interventions in the housing market (tax credits, interest rates), the next 4 months or so should present a good opportunity to get a home sold.