Disappointing data on housing prices and home sales even in the supposedly busy summer selling season underscores the ugly truth that still-high unemployment is keeping potential buyers out of the real estate market.

Three main factors are contributing to housing woes, Anthony Sanders, senior scholar with the Mercatus Center at George Mason University, told TheStreet.

“First, credit is still very tight and about 40% of households have been flushed out of the housing market. Second, we are still in a low economic growth mode with 9.2% unemployment. Third, potential home buyers are like the proverbial ‘deer in the headlights’ because of job and economic uncertainty.”

Sanders said that a high rate of joblessness remains the biggest challenge, and that the national unemployment rate must “get below 7% to really move the housing market,” adding that “9.2% unemployment is death for a housing recovery, even at super low mortgage rates.”

For a true housing recovery, “home sales have to be consistently at 2002 levels” and “house prices have to show six months of growth in the 0.5% to 1.0% range per month,” Sanders ventured.

In the meantime, the S&P/Case-Shiller 20-city index of home prices fell 4.5% in May, according to data released Tuesday morning, worse than the 4.4% drop economists had expected, and the most significant fall since November 2009.

Similar Posts:

Share