The housing market and employment used to go hand in hand.
But lately they’re like a once happy couple that hung together through the toughest of times, and then — just when things brightened a little — decided to go their separate ways, at least temporarily.
On the jobs front, unemployment in metro Atlanta has been slowly improving. After deep job losses between 2007 and 2010, the Atlanta unemployment rate improved from 9.9 percent a year ago to 9 percent in February. Georgia’s jobless rate has dipped for seven consecutive months.
But the local housing market has not even hit bottom yet. The average sales price in metro Atlanta was down 2.1 percent in January, sliding to the lowest point since mid-1997, according to Standard & Poor’s Case-Shiller index. In the past year, average prices have dropped 14.8 percent.
“In general, home prices are going to be the last thing to recover,” said Christopher Herbert, director of research at Harvard University’s Joint Center for Housing Studies.
Recent job growth helps the housing market, Herbert said, but it’s hard to see the impact.
The first change comes as more people live on their own rather than moving back in with their parents, he said. “Jobs lead to greater household formation — the link between jobs and housing starts there.”
After that, more jobs lead to stronger consumer finances, more home-owners making their mortgage payments and fewer homes falling to foreclosure.
That means fewer houses for sale at steep discounts, which means less downward pressure on prices.
At the same time, more people will have the income and confidence to buy a home.
Right now, there are just too many homes for sale.
A glut of homes
Start with years of near-frenzied construction — the housing bubble — followed by a collapse of demand, dried-up credit and then a flood of foreclosures — and you’ve got a massive pool of supply, Herbert said.
“As long as excess vacancies are there, they will continue to be a drag on home prices,” he said. “So we need to absorb that excess supply.”
Foreclosures in metro Atlanta still represent one-third or more of sales. That figure has to keep falling for the market to recover.
As the job market improves, it helps stressed homeowners make their payments. That prevents future foreclosures, which will help reduce the supply of homes on the market.
Already, there has been some improvement. The 90-day delinquency rate — homeowners who are that far behind in mortgage payments — has slipped in the past year from 9.98 percent to 8.84 percent, which is still high.
The rate of foreclosures, which are included in those delinquencies, has edged down from 3.10 percent to 2.72 percent.
And the number of foreclosures in Georgia should continue to decline, predicted Dan Immergluck, a professor in Georgia Tech’s City and Regional Planning Program.
So long as those trends continue, the overflowing pool of homes for sale will keep shrinking until prices stabilize and — finally — begin to rise.
But not yet. On average, Atlanta home values have lost 37 percent since the summer of 2006. And they still are falling, while the unemployment rate improves.
Break from the past
This isn’t the way it usually works. But the recession that started at the end of 2007 was different from the 10 other downturns since World War II.
It didn’t start with the Federal Reserve raising interest rates to choke off inflation or with factories dealing with bloated inventories by laying off workers. And it didn’t end with the Fed cutting rates or with manufacturers rushing to start up assembly lines.
This was a steeper dive caused by a financial crisis that began in the housing sector. And it’s been a clumsier climb afterward.
Without housing as part of the recovery so far, the job market’s improvement has been slower than normal. In the past two years, metro Atlanta’s economy has added 68,208 jobs. That’s only 2.9 percent growth, compared to 5.4 percent growth in the two years after the recession of 1990-91.
The job rebound is real, but it’s not robust. So housing demand is not getting the boost it needs to match the still-swollen supply of homes for sale.
The lack-of-demand story has several facets.
Much of the previous demand for housing came from immigrants drawn to work in the booming economy — or to build houses. That flow to Atlanta has dried up.
Moreover, the anemic job market doesn’t draw young Americans from elsewhere the way it did.
And then, of course, there are many young people — and some not so young — living with parents because they don’t have the income or job security to live on their own.
And while household formation is key, there is one more handicap on demand, said Immergluck: Credit.
Easy terms are history
In the frothy days of the housing bubble, lenders often did not require much proof that a buyer was in good enough financial shape to make mortgage payments. Sometimes, they didn’t even require honest answers about a buyer’s income before they passed out loans.
Now, things are different.
That’s especially true for many first-time homebuyers. Such people are critical to making the housing market work, but they often have checkered credit, uneven work histories and not much in the way of savings for a down payment.
“At the low end of the housing market, there is a real credit issue, and it is much harder for those folks at the low end to buy a house,” Immergluck said. “Job growth will definitely eat away at the problem. It would eat away more quickly if it were easier to get a home loan.”
With so few people moving into the market — and so many homes still for sale or foreclosed, it will take a long time for home prices to rise.
Slowing that process even more are the attitudes of young people, Immergluck said.
“A lot of those people in the short run will rent,” he said. “It will take a while to turn them into homeowners. . . . We have a mismatch of demand and supply.”
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