Housing and Jobs

The market for homes depends heavily on the jobs market.

Which comes first, supply or demand?

If you build it, they will come.

If you make it, they will buy.

"We not only make stuff you want, we make stuff you didn't even know you wanted." -- Larry the Cable Guy

Marketing moves product.

Without money, the best-laid marketing plans are useless.

   Look for a rebound in the housing market, but only as the job market improves, providing more people with enough income for a down payment and the ability to make mortgage payments, as well as the confidence that they will remain employed and comfortable in their income level.   However, if a family supporter has no job or earns little, the family will rent or stay with relatives. Even for many with jobs, and for low-income families, the major hurdle for owning a home is the down payment.
   In years past, lenders wanted as much as a 30 percent down payment for a conventional mortgage. Over time, that changed, aided by government programs such as VA loans, which could be had with zero down payment; or FHA loans, which call for a minimal down payment. Eventually, lenders innovated their requirements so people in general could get into a starter home with low or no down payment, anticipating that the value of the house would rise, enabling them to sell the starter home and use that increase as a down payment on a bigger, more expensive house.
   In that market, things were always looking up.

   But eventually, things stopped looking up, and the entire system crumbled along with the economy.
   Today, mortgage rates are historically low, so the supply of money for home mortgage loans is not a problem. Meanwhile, however, the demand for housing is not yet strong enough to drive up interest rates.
   The Law of Supply and Demand has not yet been repealed. The available supply of new and existing homes may be steady, and the availability of funds for mortgage loans may be rising, but the demand for homes and mortgages has not yet responded to the supply.
   There are signs, however, that spring will bring a bloom. The government has reported that building permits reached a four and half year high in November. Construction starts, however, dipped after three months of gains.
   But loan applications are off, according to the Mortgage Bankers Association, dropping 12.3 percent in the week ended Dec. 14. The interest rate for a 30-year mortgage remained at about 3.5 percent. And the National Association of Home Building said members showed more confidence in this month's survey than they have in more than six years.
   The nationwide unemployment rate, while showing a steady decline from a year ago, was 7.7 percent in November, according to the Bureau of Labor Statistics. There's a wide range among states, however, with North Dakota showing the lowest, at 3.1 percent, and Nevada the highest, at 11.5 percent in October, the latest month available for state data.

   It's important to remember, however, that as with many other aspects of a national economy, housing and job markets are local, and the interplay of the two reflects that. So while national trends may be encouraging to politicians and to industry leaders, the people may remain suspicious.
   Nonetheless, if the economy continues to improve and jobs become more available, look for the housing market to respond to an increased demand.