Friday, June 17, 2011

Falling Home Prices and the Job Market | PV Brokers Residential Real Estate




The bottom line:

Let's face the facts, home prices won't rebound until jobs come back. But jobs won't come back until the housing mess gets fixed.

This is large a problem being that the housing market and the broader economy are having trouble getting back into gear. Hiring appears to be losing steam, and after home values hit a post-boom low, many experts are projecting further price declines.  In a contrary investing world, this could be viewed as a positive as popular belief is being reinforced by the negative feedback cycle in the media and elsewhere.

"The economy can move forward without housing," said Mark Zandi, chief economist with Moody's Analytics. "But I don't think it can flourish and create enough jobs to bring down unemployment in a significant way without a revival of the housing market."

Moody's Analytics aas well as mortgage finance giant Fannie Mae (FNMA, Fortune 500) project an additional 5% home price decline through the end of this year. However, some economists believe the turnaround top be even further away. Barry Ritholtz of Fusion IQ and Dean Baker of the Center for Economic and Policy Research both think prices are overvalued by as much as 12%.

"Right now home prices are a falling asset class and have been for five years," said Ritholtz. "That almost becomes a self-fulfilling prophecy."

Historically, housing helps lead the way in an economic recovery not only through a surge of construction and the hiring that goes with it, but though demand for goods and services that go into forming a new household.

"The worst thing about a damaged housing market is it that freezes all types of economic activity," said Ritholtz.

Palos Verdes Real Estate and Torrance Real Estate have been similarly affected by this strong macro-economic trend.

Economy Appears to Worsen

Baker worries about what kind of overall growth can be achieved if housing continues to suffer.

"Housing has been very important in other recoveries. That's not the story today. It's tough to see what else could take the place," said Baker.

Doug Duncan, chief economist of mortgage finance giant Fannie Mae, is focused on the impact of jobs on housing -- and vice versa.

"Our mantra all along has been employment, employment, employment," Duncan said. "Until you see employment growth and then income growth and then household formation, you don't get to the bottom of this."

Duncan is anxiously awaiting the government's monthly unemployment report on Friday. He said a further slowing in the economy could push back his forecast for when a housing recovery will begin.

On Wednesday, payroll processor ADP showed reported that hiring by businesses ground to a halt in May, raising concerns about the recovery in employment. Economists surveyed by CNNMoney are now forecasting 170,000 jobs were added in May, barely enough to keep up with population growth. To top of page


Palos Verdes Estates Home for Sale

1033 Via Nogales, Palos Verdes Estates, CA, 90274


Charming Montemalaga home with ocean, coastline and city views. This palos Verdes Estates home is situated on a large lot and features a tiered backyard ideal for kids play and entertaining. A large family room with fireplace boasts city light and “queens necklace” views. The trees partially blocking the ocean view have been removed, greatly enhancing an already spectacular view. This three-bedroom two-bath home is located within walking distance of award-winning Montemalaga Elementary. A great opportunity to own Palos Verdes real estate.

For more information about Palos Verdes Real Estate and South Bay or buying and selling a home on the Palos Verdes Peninsula, visit my website at . We provide specialized attention for all your real estate needs in the South Bay Los Angeles and the Palos Verdes Peninsula. We would love to hear your comments or suggestions.


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Bart Cleveland
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