July 1, 2005
Bringing down the house
More froth, courtesy of the Financial Times:
The number of realtors in the US has jumped by 45 per cent over the past four years to 1.1m, and many have left blue-chip companies or even delayed college to join the property jamboree. More joined the profession last year than at any time since records began in 1975.
Add in jobs in residential construction, furniture and DIY stores and mortgage finance, and the buoyant property market emerges as the main driver of employment growth over the past four years. Economy.com, the consultancy, estimates that about a third of the 2.6m jobs created in that period were in housing-related sectors.
… Even if house prices remain high, any slowdown in this frenetic activity could endanger jobs, says Mark Zandi, chief analyst at Economy.com.
“Traditionally, the housing market has only really got into trouble when the employment situation got worse,” he says. “This time we could see the reverse, with a slowing housing market acting as a drag on employment.”
The Economist, citing a two-year-old IMF study, considers the potential impact:
One of the best international studies of how house-price busts can hurt economies has been done by the International Monetary Fund. Analysing house prices in 14 countries during 1970-2001, it identified 20 examples of “busts”, when real prices fell by almost 30% on average (the fall in nominal prices was smaller). All but one of those housing busts led to a recession, with GDP after three years falling to an average of 8% below its previous growth trend. America was the only country to avoid a boom and bust during that period. This time it looks likely to join the club.
Housing bulls point out that U.S. house prices haven’t fallen since the Great Depression. Housing bears have noticed that too.
Posted by Stephen at 11:20 PM in Economics | Permalink | TrackBack (0)
Trackback Pings
TrackBack URL for this entry:
http://www.disinterestedparty.com/cgi-bin/mt/mt-t.cgi/283
