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By Drew Kessler
Managing director
KMG Mortgage Consulting
3 Words: Jobs, Jobs, Jobs
As long as unemployment remains high, the housing market will suffer
Economic cycles can be vicious. Take our recent iteration: The housing market collapsed and
the job market followed; now the housing market looks to the job market for
recovery. That might sound illogical,
but it’s almost certain that housing
won’t recover until the national employment picture improves significantly.
In the first half of 2010, the housing
market took considerable strides in
the right direction. National inventory
levels shrunk to about eight months’
worth of supply, creating a somewhat
stable pricing environment. This, of
On the Web
The U.S. Department of Labor
maintains numerous unemployment statistics. To view an archive of press releases, visit bls.
gov/bls/ newsrels.htm.
course, was largely because of federal
tax credits that now seem like ancient
history. Low interest rates and depressed home values also helped.
alas, buyers exited the market in
unison when the tax credits expired.
In addition, national unemployment
stayed above 9 percent — where it
has been for 20 straight months as of
press time. Mortgage rates and home
values remained low, but the housing
market again faltered. according to the
National association of Realtors, the national inventory level had 9. 5 months’
supply as of this past November.
Until the unemployment rate returns
to the 6-percent range — generally considered a healthy rate — a sustained
and widespread recovery appears unlikely. We need look back no further
than the 1980s to prove this. In fact, before May 2009, the last time unemployment was greater than 9 percent was in
September 1983, according to the U.S.
Department of Labor.
Just to keep the unemployment rate
from increasing based on growth in
the civilian labor force, more than
1.25 million jobs must be created annually through 2018. Recently, slower
growth has reflected large employers’
refusal to add to their payrolls for fear
of additional economic downturns and
the difficulty small to midsized businesses encounter when seeking funds
to expand.
To make matters worse, many U.S.
residents out of work don’t count into
unemployment figures because they
have stopped looking for a job. Many
of these people likely will resume their
search when the job market improves.
as a result, it seems unlikely unemployment will return to 6 percent for at
least three to four more years.
In turn, housing prices will con-
tinue to struggle. Mortgage brokers
who accept this reality and tweak
their business approach can position
themselves to cope. In some cases,
this can be as simple as empathizing
with clients and specializing in less-
expensive homes that have potential
to appreciate in promising geographi-
cal markets.
Drew Kessler is managing director of KMG
Mortgage Consulting. He is the immediate
past president of his local board of Realtors
and is the first loan officer in the board’s
history to achieve that honor and position.
Kessler appears regularly on Fox Business
News for his expertise on the housing
industry, and he publishes a weekly housing
report at drewkessler.com. Reach him at
drew.kessler@kmgmc.com.
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