Friday, July 3, 2009

Poor Jobs Data Doom Any Talk of Quick Real Estate Turnaround

"The American economy lost 467,000 more jobs in June, and the unemployment rate edged up to 9.5 percent in a sobering indication that the longest recession since the 1930s had yet to release its hold."

To read the rest of the article from The New York Times, click here.

Anyone who is telling you that the current crisis in the U.S. real estate markets is about to end or that there is "light at the end of the tunnel" is either lying to you or has no clue what they are talking about.

Real estate markets are merely reflections on income. When income rises, so do real estate prices. This is true on a national level or in the smallest village anywhere in the world.

Take, for example, a tiny hamlet in the middle of nowhere. When jobs are plentiful, factories and stores open, and the restaurants full, real estate prices will rise because local income is rising.

When the same town is faced with closed factories, abandoned shopping malls, and a dying Main Street real estate prices will fall.

An economy cannot continue to lose 500,000 jobs a month and grow its way back to real estate prosperity. Until income rises, real estate prices will continue to fall. And like fighting gravity, income is going to have to rise sharp, fast, hard, and long to budge all types of real estate prices which have been driven down by inertia and want to stay that way.

Robert J. Abalos, Esq.