When, Where, and How?
The housing market has a direct effect on the economy and always will. Of course there are several factors that have led to a strained economy, but at times none seem more apparent than the struggling housing and real estate market, that continually seem to slow down any strength that the economy gains. So what exactly is keeping the housing market from getting into gear?
Jobs, Jobs, Jobs: In terms of the current housing market, what we need for a rebound more than anything is simple—jobs. It is difficult to market homes, plan mortgages and help people understand the market place when they don’t know what the next month will bring. When people are confident in their job situation, they will make long-term, large purchases. The housing market has always mirrored the job market. As unemployment stopped increasing, the housing market slowed its devaluation. Since many potential buyers are out of work or fearing the possibility of unemployment, they do not want to take on a long-term investment when they are unsure about their long-term source of income. The housing recovery will truly begin with the turnaround of employment.
Small Business Lending: Small businesses create the majority of jobs in this country, yet with the current economic setbacks and an uncertain business environment, they aren’t borrowing as much money as they have in the past. Under today’s conditions, even if small businesses wanted to expand, there is little credit available as small companies use the value of their own property to secure bank loans. Simply put, small business is caught in the middle. They need property values to increase in order to see a rise in their own ability to get loans and create jobs, but property values need a better jobs market to increase and offer more equity to loan against.
New Home Construction Stuck In Idle: According to a CBS News report, in 2005 two million housing units were built in this country. Last year the amount of units built dropped to nearly a quarter of that number. Currently builders don’t have the same amount of money or buyers for the homes they once planned on building. When housing starts to find consistent tracking, property values will start to find the footing to begin its climb up again.
Currently the housing market is one of the biggest financial challenges in the country. Though it is just a portion of the U.S.’s economic structure, its impact is causing a tremendous toll that will continue to have a far reaching effect on our economy.