Will the Housing Market Encourage Job Growth?

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We were fortunate to see the housing market return to health in step with consumer confidence last year. The nationwide average in real estate values climbed steadily through the close of 2012, and many otherwise unsellable (or underwater) properties became safe to put on the market. However, it seems growing health in the property sector could yield additional benefits as well.

According to a new report from Yahoo! Finance, recent evaluation of the Wells Fargo Housing Market Index portends a potential boom in housing-related jobs. While job growth has lagged behind other growth measurements in the past two months, it’s clear that the property market is becoming one of our strongest economic sectors. Despite lackluster performance in the job market, the value of American real estate continues to climb. Taking all this into consideration, current trends point to the possibility that outstanding performance in the housing market may also work some magic for the job market as well.

As the Yahoo! Finance report notes, there has been a notable historic correlation between robust performance in the HMI and the creation of housing-related jobs. Certain regional property markets have become so strong that homebuilders are beginning to actively construct new homes, and with the number of newly minted construction permits on the rise, we may well see an increase in jobs originating from the housing sector. Assuming the recovery continues unimpeded, the housing market could become one of this year’s job growth engines.

The Connection Between Housing and Jobs

One of the potential late-onset benefits of a housing index rebound is the accumulation in housing-related job growth. As I noted in a prior post, the national shadow inventory is rapidly decreasing, and the coupling of high property demand with decreasing sales inventory could further encourage new construction. With newfound economic incentive to develop property and survey real estate, an adjacent demand for human capital and manpower may emerge as well. Certain projections forecast the annual creation of 700,00-750,000 housing-related jobs starting this year, which isn’t unduly optimistic if the housing market maintains stable growth figures.

So, what does this ultimately mean for real estate investors and the market as a whole? If the housing market does contribute substantive job growth, one of our nation’s current strongest sectors will help correct what would otherwise be an impediment to a full-on economic recovery. Stagnancy in the housing market and high unemployment protracted the recession, and if both areas work in tandem to correct the other’s shortcomings we may see a swifter emergence from economic stalemate. Any housing-related job creation would be intimately tied to the performance of the housing sector itself, so market forecasters may be well advised to keep a pulse on monthly sales volume.
Photo:California Cthulhu (Will Hart)

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About Author

Harrison Stowe is a writer for NVR Inc., a prime developer of Baltimore new homes. Addressing a range of topics including investing, mortgages, and real estate, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.

2 Comments

  1. Harrison,

    Commenting on your first paragraph only, don’t you think this it is interesting that what is driving this recovery is Wall Street? These are the very fellows that caused the housing price spiral and then collapse.

    I know everybody especially the media is touting the end of the old RE market and the beginning of the a new solid RE market formation, but really all that has been accomplished is the dispossession of property from quite a few middle Americans and into the hands of Wall Street from the Banks who were both bailed out by John Q. Public.

    So what we have here is a market being driven by Blackstone group and a lot of hedge funds.

    Don’t get me wrong it is best to profit while one can, but it is also best to know ones risk going in. As we have seen in the past Wall Street will be bailed out, we will not.

    Nice to know Wall Street is again profiting from converting millions of Americans from property owners to property renters, and in the process ruining their credit, which will keep them in serfdom for the better part of their lives. The best part is the media has kept the lid on who really shoved it to them all.

    And as in the last run up of the RE market his market is a false one as well, with the Fed pushing down interest rates, and Wall Street causing a shortage.

    I know no one on these boards likes to tout the stock market, because they think it is a crooked game. They would be right on that account, but the market tends to seek a equilibrium which after a nice run up this coming year it will again do. But now we have to worry about Wall Street doing the same in the housing market, because groups like Blackstone have very little skin in the game, I would be very aware they will at some point have no problem taking profits by selling like mad men. When they decide the market prices are where they want them, they will create an environment just as was before the bubble burst and then sell off.

    Just an observation, and a suggestion about allowing prices and RE shortages from clouding
    anyone’s judgement, or returning us to a similar cycle as the last highly manipulated run up in prices.

    Just a heads up housing does not drive the economy, the Stock Market does, no business growth, no jobs growth, no real housing growth. Personal and business debt is not growth in the economy. Unless interest rates are allowed to seek an equilibrium there will be no real growth in employment.

    So the big picture: millions of Americans have had their retirement plans destroyed, and now they have become renters with decreased credit scores, and their (mistake one) largest investment their home is long gone possibly forever as Wall Street and the Banks are locking them out of the market. Nice how this works in the USA these days.

    The hilarious part of this whole mess is the people have voted.

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