Employment Shows ‘Missing Households’ Still Weigh on Housing

Following is a noteworthy piece published in The Wall Street Journal earlier today with commentary from attorney Scott Weitz.

Today’s jobs report shows construction employment is up strongly, but in many other ways, the report was bad for housing, according to a report by Trulia Chief Economist Jed Kolko. The reason: Young adults aren’t getting jobs, a factor that weighs on household formation — the single most important factor to long-term housing demand.

About 75 percent of 25- to 34-year-olds were employed in September, about the same as September 2012 and closer to the depths of the recession than before the housing bubble started forming. Young people who don’t have a job are more likely to live with their parents and become “missing households” that aren’t renting or buying their own place.

That’s bad for the broader economy in all sorts of ways, such as lower spending on things such as furniture. These missing households are part of the reason why first-time home buyers have been lagging in the housing recovery.

This is an issue that will continue to linger over the economy. Most young graduates are entering the workforce to find a very difficult job environment. I think 'underemployment' is a huge problem as kids with degrees from great schools are being forced to work in jobs that do not utilize their education. This, coupled with the huge increase in student loan debt over the past 10 years, will be a drag on the economy for years to come.

— Scott Weitz

The jobs report is just the latest piece of economic data to pour some cold water on this year’s housing recovery. Existing home sales were down 1.9 percent in September from a month earlier, in part because of higher interest rates. The month-earlier pace was revised downward.

To be sure, housing is far better off than it was a year ago. The July/August sales pace was the best since 2009, and inventories, while up, remain low by historical standards.

Still, it’s fair to say that housing has cooled off from the torrid pace seen in spring and summer.

Online real-estate brokerage Redfin* reported that its gauge of home bidding wars fell for the sixth month in a row in September.

It will be interesting to see where the market goes from here. Based on inventory increasing, we anticipate that prices will lower, but much of it is interest rate driven and that is an unknown at the current time.

— Scott Weitz

The original article, authored by Conor Dougherty, former staff reporter for The Wall Street Journal, can be found at blogs.wsj.com.

*The same Redfin report showed that the number of Seattle homes with multiple offers rose from 49.2 percent in August to 57 percent last month, with 1.4 percent of offers averaging higher than the asking price.