Housing Turned the Corner?

There are two things that are going to lead this economy to recovery – housing and jobs! Every end to a recession has been led by growth in the housing market. Why? It’s easy housing creates a huge “multiplier-effect” on the economy. For every dollar spent in housing it creates five dollars in the economy. It is the leading  industry when it comes to this all-important multiplier effect. This effect in turn creates a multitude of jobs and without jobs there is no recovery.

Don’t let the “Headline” Economic numbers fool you. While some growth like the 226,000 jobs created last month per the Labor Department is better than no growth at all, we have to look at the productivity of the jobs as it relates to the worker. For example, the February job numbers show an anemic growth rate in wages, an almost negligible .01% That means that every-one’s wage went up by a whopping three cents per hour. Moreover, there was zero growth in hours worked. Is fewer hours worked with a paltry three cents an hour any way to sustain a viable economy. As it relates to housing do you think three cents an hour increase for average Joe will induce him to buy a home?

Despite what the pundits say the housing market has not “turned the corner”. Home prices continue to fall below the after-crash levels of 2008. In addition, the “Shadow Inventory” of foreclosed homes remains the same. We haven’t come close to putting a scratch in it much less a dent.

On top of that since we are in a global economy having the European Union mired in a recession with zero growth doesn’t bode well for a strong recovery to our housing market or economy. How bad is it? Well in Spain the unemployment rate is twenty-two percent (22%) and still rising. The most important age group for long-term growth 18-30 is at forty-fiver percent (45%) no jobs there means they cannot buy our products produced here.

The growth in consumer credit is because people are accessing their credit-cards just to maintain there living standard – not the type of consumer spending that you see in a flourising economy. Realte that to housing – if you are “living off of your credit cards” are you going to purchase a home?

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