‘Foong on Finance’: High Unemployment Levels Depress Housing Market

By Keat Foong, Executive Editor

What recovery? The housing market has, if anything, made fresh turns downwards recently. The homeownership rate has dropped to 66.4 percent, the level in 1998. It seems recovery in the housing market has not come in at least the first half of this year.

Meanwhile, a new report from the Joint Center for Housing Studies of Harvard University confirms that new home sales continue near record lows, and existing home sales remain depressed. Vacancies and foreclosures continue to push down housing prices, says the Joint Center.

Contrary to assertions about a structural change in people’s desires to own homes, perhaps many people would ultimately still prefer to buy and own their homes and invest in real estate rather than rent for the rest of their lives. And home prices are attractive and more affordable today.

Whatever the case, high unemployment and tightened lending standards are limiting the ability of first-time home buyers to enter the market, states Eric S. Belsky, managing director of the Join Center. Thus, weakness in U.S. employment is also constraining the ability of the housing market to bounce back.