Pay Attention To The Employment Data, For Housing’s Sake

Posted In: Economy, Employment, Foreclosures, Home Prices, Homeowners, Housing, Mortgages, U.S. Government, Unemployment

If you haven’t heard by now, the latest U.S. government employment numbers that were released earlier today sure weren’t pretty. Bloomberg’s Shobhana Chandra reported:

The U.S. lost more jobs than forecast in August and the unemployment rate climbed to a five-year high of 6.1 percent… Payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said today in Washington.

Chandra added:

Today’ report brings the total decline in payrolls so far this year to 605,000. The economy created 1.1 million jobs in 2007.

You might be reading this at work right now, contemplating whether or not your job is safe. Yet, there’s something else you might want to think about as well, especially if you’re looking to sell your home anytime soon or otherwise depending on a housing rebound. CNBC’s Albert Bozzo wrote earlier this week:

If the extraordinary and unpredictable haven’t completely crushed the housing market, the conventional and cyclical may yet finish the job.

Much has been made of the popping of the real estate asset bubble and the entrenchment of the credit crunch.

But little attention has been paid to what a recession and accompanying spike in unemployment could do to a housing market already stricken by faltering sales, sinking prices, high interest rates and soaring foreclosures.

And the timing couldn’t be worse.

Bozzo interviewed Dean Baker, co-director of the Washington, D.C.-based Center for Economic Policy Research, about the relationship between unemployment and housing. Baker said:

There’s definitely a relationship. Where there’s unemployment, there’s downward pressure on prices.

And regarding the ongoing U.S. housing bust, “We’re going to see an add on effect from job losses,” added Baker.

CNBC’s Bozzo also spoke to Rick Sharga of RealtyTrac, a leading online marketplace for foreclosure properties. Bozzo wrote:

Rick Sharga, SVP at RealtyTrac, sees unemployment adding “another leg” to the foreclosure problem, adding that before the arrival of sub prime, credit crunch factor, “the single best predictor of foreclosure rates was the unemployment rate.”

“If we do see an economic downturn then all bets on this foreclosure cycle being over are off,” he says. “Prices will become vulnerable again. You’re going to see more price depreciation.”

Bloomberg’s Kathleen M. Howley reported on the latest foreclosure numbers earlier today. Howley wrote:

Foreclosures accelerated in the second quarter to the fastest pace in almost three decades as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter…

Don’t be surprised to see more calls for a turnaround in the housing market thwarted should job losses continue to grow. Nigel Gault, Group Managing Director of the North American Macroeconomics Service for forecasting firm Global Insight, explained to CNBC: