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Sunday, May 20, 2012

Real Estate Prices and Unemployment

Real estate prices are always a strong correlation with the U.S. unemployment rate. Over time, as the United States, which is at full employment (5% or less unemployment), housing prices in terms of better times higher unemployment have done. This relationship between housing prices and unemployment in the United States has everything to do with demand for housing.

June Unemployment Rate: 9.2%
The latest unemployment report in June showed a very small gain of 18,000 jobs in the United States included. That was far below expectations, and the U.S. unemployment rate rose to 9.2%. After combing through the entire unemployment report, there is no better word to the unemployment report in June 2011 other than "pathetic" to describe. If the U.S. unemployment rate continues to disappoint, the relaxation will be extended to you in real estate prices even further.

Why Unemployment affects real estate prices
The unemployment rate affects the real estate prices, especially on the demand side of the real estate economy. Most home buyers need a mortgage to finance the purchase of a house. In order to obtain a loan, lenders require that thes homebuyers to meet certain income to debt ratio, keeping stable employment, unemployment, etc. With such a large percentage of the U.S. population, this eliminates many potential buyers from the housing market. Even if people are unemployed, the last thing they tend to be about buying a new home or making a large investment to make in real estate concerns.

In economics, when supply exceeds demand, prices will fall. And conversely, if demand exceeds supply (think of the real estate boom) exceeds, to raise prices. Given the high U.S. unemployment rate of 9.2% and the large amount of shadow inventory expected to flow through the pipeline, the future of U.S. housing prices do not look so bright.

Housing prices and unemployment: Conclusion

The first step on the road to recovery for the U.S. real estate prices have improved in the U.S. labor market. Without the creation of jobs, real estate demand will continue to be a problem. Although the U.S. government trying to help a substantial amount of money to improve the labor market has moved, it has apparently been in vain.

If the U.S. unemployment rate does not improve the image below is a perfect example for the future of property prices.

Another informative article on Google Real Estate.

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