Will the Housing Market Encourage Job Growth?

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Harrison Stowe Read More

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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)