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Crewleader

(17,005 posts)
Thu Dec 15, 2011, 12:40 PM Dec 2011

Housing Cannot Recover If Employment Is Trending Down

(December 14, 2011)


Housing cannot "recover" until employment recovers.

by Charles Hugh Smith


The Federal Reserve is working on the theory that all housing needs is a boost in demand driven by cheap financing and near-zero down payments. The steady decline in housing valuations suggests that the Fed's theory is incorrect. Cheap money simply fuels reckless speculation by those protected from risk by Federal guarantees; in the real world, housing is correlated to employment, not cheap money.

If employment is in a downtrend, then housing will follow. In Another Reason for Stocks to Tank in 2012: Jobs (December 8, 2011), I posted some charts that showed--surprise--stock valuations were correlated to employment. (no job = no money to dump into 401Ks and equity accounts.)

It’s also no secret that housing and employment are correlated, and the causation is intuitive. If more people have jobs, then more people have incomes that support the purchase of a home. In the other direction, the more houses that are built to meet rising demand, the more jobs will be created in construction and real estate.

We can see the correlation in this chart from the St. Louis Federal Reserve displaying employment per capita for workers age 45-54 and the index of home prices.

http://www.oftwominds.com/blogdec11/housing-employment12-11.html?source=patrick.net

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Housing Cannot Recover If Employment Is Trending Down (Original Post) Crewleader Dec 2011 OP
Even then...across the generations that might consider buying...the CONFIDENCE is gone... InkAddict Dec 2011 #1

InkAddict

(3,387 posts)
1. Even then...across the generations that might consider buying...the CONFIDENCE is gone...
Thu Dec 15, 2011, 08:55 PM
Dec 2011

Low wages, the expenses of illness, a casino of investment opportunities where the house noteholders always win...and loss of employment just because employers can...

Should we all just clap our hands, as for Tinkerbelle, that more of us will regain the lost trust we had when we thought we had a home that would BE THERE for us throughout a family's earning years and perhaps thereafter, that we'd we able to weather short periods of unemployment, very expensive repairs to our own infrastructure like rooftops, furnaces, and major appliances, and still help our children meet the financial demands of a college education?

Sorry Fed, once bitten/twice shy--you've not earned back the trust quite yet!

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