But What Happens to Housing Markets When the Unemployment Rate Doesn’t Drop?

If 9% of the workforce is out of work with an underemployment rate (rate of part-time workers seeking full time employment plus the unemployment rate) of 18.9%, how can you reasonably expect a recovery in the housing market if a fifth of the US population doesn’t, you know, have the job security to buy a house? When will the housing market recover? Not immediately, say experts.

Not immediately. At the moment, prices are still dropping. In 20 large cities, prices fell 0.8 percent in March from the previous month, according to the Standard & Poor’s Case-Shiller Home Price Indexreleased Tuesday. That pushed the closely watched index below its level of two years ago to a new post-bubble low, and put it 33.1 percent under its July 2006 peak.

Which is a larger drop than recorded in the Great Depression.

Some experts are arguing that we have basically seen the bottom of the housing market because unemployment has peaked, and in recessions housing markets don’t bottom out until unemployment peaks. The graph below shows that:

But since ’76, unemployment hasn’t stayed at 9% for so long. To me, commentary like this seems a little clueless:

“There’s a lot of pent-up demand for housing and someday it will be unleashed,” Mr. Smith said, adding: “Your guess is as good as mine when it will come.” NYT

There isn’t pent-up demand. People are running away from owning houses at historical rates. What you have is potential in that there being a lot of bodies that could be put into houses if Americans had jobs and job security. I posit it will occur well after private sector job growth isn’t anemic. So have fun waiting for that.

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