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April 3rd, 2010 (Modified on April 5th, 2010)

This is How Jobs Impact Housing

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Yesterday we wrote that “We need to consistently add in excess of 250,000 — 300,000 jobs each month before the unemployment rate will show any true signs of improvement.” March’s numbers were not only well under that level, they failed to show any signs of consistency:

From October 2009 until March 2010, each month’s numbers have alternated between losses and gains.

Although jobs and housing make up two separate marketplaces, Nick Timiraos of the Wall Street Journal points out just how related the two are. The inconsistencies in the monthly job numbers and the unimproved unemployment rate are two main factors to why housing has also not been able to show signs of a significant recovery.

We’ve said many times before — whether it concerned automobiles or housing — if consumers aren’t confident in their employment status, they aren’t buying. Furthermore, Timiraos points out that “more borrowers fall behind as they lose their jobs,” especially if they are underwater (emphasis added):

A report from Freddie Mac last week shows that job losses drove the vast majority of missed payments last year among prime borrowers, or those who have good credit. Freddie Mac said that 58% of its borrowers who went delinquent last year cited unemployment or reduced income for missing payments, while another 16% said payments had become excessive.

Freddie Mac reported that the number of its loans that are 90 days or more past due grew to 4.08% in February, up slightly from 4.03% in January. That’s the slowest rate of increase in more than a year, though seasonal factors (delinquencies typically do better in February than in January) and an uptick in recently modified loans that are re-performing could help explain the easing deterioration.

When can we expect this to improve?

Early-stage mortgage delinquencies are expected to peak this year, and housing analysts have been looking to see when that might happen because it would represent a significant green shoot for the market. The Mortgage Bankers Association quarterly survey suggests that may have begun to happen during the fourth quarter, as the pace of job loss eased. But formally hitting a peak in early-stage delinquencies may be a Pyrrhic victory at this point because the pool of loans that are seriously delinquent continues to grow larger.

Some studies have shown that as borrowers’ incomes become more strained, more and more are prioritizing credit card debt before their mortgage payments. As far as job and housing recovery goes, you can’t have one without the other.

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One Response to “This is How Jobs Impact Housing”

  1. WSJ: A Familiar Headline « Kicking Over My Traces Says: April 3rd, 2010 at 9:51 am

    [...] This is How Jobs are Impact Housing (hsh.com) [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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