A bad employment report will hopefully provide some relief for buyers, here’s why:
1. For the sellers who are waiting to list because they think the economy is getting better, hopefully a bad jobs report will cause them to think otherwise. The economy isn’t stable enough to expect it to get substantially better anytime soon.
So hopefully more sellers will decide to sell now, while mortgage rates are at 60-year lows and we need the inventory. In August, 2006 there were 21,000 homes for sale in San Diego County, today there are 6,101.
2. Hopefully bad economic news will dissuade some buyers, and soften the rip-roaring demand we are experiencing. Of the sales I’ve closed this year, 80% of them had multiple offers.
3. You read everywhere that housing depends on jobs, but how many people who find a job this month are going to buy a house next month? None. More jobs today might fuel some future real estate demand, but more new jobs today won’t equal more home sales today.
4. Consumer confidence – won’t today’s committed homelookers pause when they see the Dow dump 2.22% in one day over a bad jobs report?
Don’t most people think the stock market is a rigged casino by now, and expect it to bounce around? I don’t think committed homelookers will back off until we see a change in the low-inventory environment. It doesn’t look like there will be any new surge of inventory from banks or elective sellers, both who seem content to wait for higher prices.
The only hope for increased inventory is from short sales, with the looming debt-tax exemption set to expire on January 1, 2013. But you don’t see any soundbites about Congress extending the exemption, which enables potential short-sellers to delay the decision, thinking it will somehow miraculously happen later. If the tax exemption does expire at the end of this year, it will cause many of those potential short-sellers to NOT move, rather than to sell and pay the debt-relief tax.
The best thing that could happen today for buyers is to have banks to unleash their inventory to help satisfy the demand throughout San Diego County. Unfortunately, there are only around 5,000 homes owned by banks, so it would be a short-lived rally. But if they cut them loose, and the REOs were gobbled up, maybe it would help banks recognize that demand is healthy – and they should be putting more pressure on defaulters.
Buyers will come back en masse when a system exists that isn’t based on the current cartel-like mentality of NAR and MLS Board.
Certainly, but that’s a long ways off and other buyers aren’t waiting.
My key points: 6,101, and 80%.
Higher unemployment may also cause sellers to pull their house off the market and wait it out. It really depends on the sellers mentality.
If the stock market continues to slide, retirement funds will take a major hit along with consumer confidence. A potential buyer will be less likely to plunk down 20% for the downpayment and lock into a 30 year committment.
I think people buy homes based on how secure their job is, less so on whether new jobs are being created fast enough or what the stock market is doing. Jobs are more secure now than they felt a few years ago (when it seemed like we were sliding off a cliff). But I also think there may be a new paradigm of buyers and people only buy homes who really need to, rather than people moving every 5-7 years just for the hell of it and buying because they thought homes were an “investment”. So maybe supply/demand are now in sync, and prices will stay close to this level? To me, the wildcard is inflation, especially rent, which would make home purchase look more attractive. When prices are flat and a mortgage payment is much higher than rent (and the “investment” potential appears gone), why would people run to buy homes unless your really had to? To me, either home prices have to start going up (making them an investment again) or rent has to get more expensive to make hoards of new home buyers appear.
QE III might become a reality, then mortgage rate could head even lower, which in turn would ignite a new wave of rushing to buy. Bad job report is a double edged sword.
When one kicks the can down the road, eventually they run out of road. It’s just a question of when.
@ just sayin’: the “home as an investment” mentality couldn’t be stronger now in consideration of the numbers Jim posted. The difference? The predominance of “professional” investors looking for a return, as opposed to “ATM investors” looking to pad their retirements or buy that new Hummer. And though James mentioned a “cartel-like” mentality on the NAR and MLS in post #1, I’d posit that a bigger threat to a healthy market is that same mentality prevalent amongst investors. There’s strength in numbers…
I feel like there is a near-constant predisposition for people to attempt to buy property, regardless of job security and general economic health. It seems like an ever-present force of nature. Like gravity. I have been completely stunned by more than a few friends who have purchased property coming off of long periods of unemployment, shaky job situations, revolving doors on jobs, etc. It’s an amazing phenomenon.