Jobs, Jobs and More Jobs
by Tom on December 31, 2009
in Market Musings, house prices
I got this chart from Calculated Risk (my favorite chart master). It shows the relationship between house prices and the unemployment rate over the last years. A couple of points to make about this chart:
- In the past, there has been a “general trend” linking unemployment and house prices.
- The current “bubble” shows that almost exactly when unemployment started rising is when house prices started falling.
Now a case could be made for the “chicken and the egg” question (which came first – a drop in house prices or an increase in unemployment?) But to me, it’s pretty clear that the unemployment is the driving force in the equation. Why? It’s pretty simple – if you don’t have a job, it’s pretty hard to make your mortgage payments. If you can’t make your payments, you end up either selling your house or the bank ends up owning it. An increase in inventory pushes prices down.
So, what do we need in order to turn the housing market around? Do we need more artificial tax credits and unbelievably low interest rates? Nope. What we need is jobs. Plain and simple, we need jobs that people can feel comfortable with and that allow them to keep making their payments and to keep living their lives.
That will solve the housing problems and stabilize house prices, not at the inflated “bubble” prices but at a price that is in line with current wages.
What do you think?
Tom Vanderwell
Technorati Tags: House Prices, Unemployment
Tom,
The dopes in Lansing and Washington don’t get it. They’ll keep throwing more money down an endless pit, resulting in even more punitive tax structures, meaning that more businesses will go under. No entrepreneur in their right mind would start a new business in such a climate, so unemployment will continue to grow.
All of this is why I lead every one of my daily blog posts with “FYI – only 310 days until November 5, 2010, when we VOTE THE INCUMBENTS OUT!”
Tom,
The dopes in Lansing and Washington don’t get it. They’ll keep throwing more money down an endless pit, resulting in even more punitive tax structures, meaning that more businesses will go under. No entrepreneur in their right mind would start a new business in such a climate, so unemployment will continue to grow.
All of this is why I lead every one of my daily blog posts with “FYI – only 310 days until November 5, 2010, when we VOTE THE INCUMBENTS OUT!”