By Robert Freedman, senior editor, REALTOR® Magazine
The two top economists we heard from yesterday on the state of residental markets were genuinely optimistic but just as genuinely concerned. The optimism stemmed from the clear improvement in the economy we’ve seen in the past several months, particularly in the jobs picture. We’re now creating about 125,000 jobs a month after losing almost 9 milion jobs during the meltdown. As you’ll see in the first video clip of Mark Zandi, chief economist of Moody’s Economy.com, we’re creating jobs at the rate we need to to get back to full employment (defined as an unemployment rate of 5.5 million), but it will take years to get there. Watch the 40-second clip to hear his take on where jobs are going.
What brought us to this point of stability? NAR Chief Economist Lawrence Yun made it clear it was the home buyer tax credit and continuing low interest rates (thanks to Federal Reserve’s intervention in the mortgage-backed securities (MBS) market).
With those federal rescue efforts stabilizing home sales (now on track for about 5.5 million existing-home sales), the broader economy was able to get back on its feet, and now companies are enjoying profitability growth and improved balance sheets. That’s what’s led to the improvement in the jobs picture.
See Yun’s 30-second remarks on the role of the tax credit in stabilizing markets.
Where Yun and Zandi diverge a little is in prices. Yun believes we’ve hit price stability, setting the stage for value increases. And indeed, prices are already going up in many markets around the country, including San Diego, where prices are up a good 15 percent.
Zandi thinks prices aren’t quire ready to rise yet, largely because of the large overhang of distressed houses on the market or about to be put on the market. Those distressed houses are really an albatross around the neck of the market. Hear his remarks in this 25-second clip:
Yun and Zandi are in agreement about the danger posed by the federal government’s huge deficit spending. Although both say the federal government was right to run a large deficit to rescue the economy from free-fall, it’s critical for the government to turn its attention to shrinking the budget gap. Otherwise, interest rates will have to rise, and that will choke off the recovery.