Get Blog Updates on your iGoogle homepage:
| Jobs Are a Good Signal of Housing Market Health |
| Written by Jonathan Smoke | |
| 06.18.2007 | |
|
Discuss this article on the forums. (0 posts) As promised in Friday’s post, we pulled the data on all metropolitan statistical areas in the U.S., and it confirmed that job growth (or losses) are a good indicator of the future performance of housing at least as it relates to the home price appreciation. We used home appreciation between 2006 and 2005 and compared the results to job growth over the same period. As you can see from the chart below, the two measures are positively correlated, confirming our hypothesis and supporting the finding that job losses are the single biggest factor that drive declines in home price appreciation reported in The State of the Nation’s Housing 2007.  But just as the paper reported, jobs don’t tell the whole story. The R-Squared of the home price appreciation to job growth was only .18. While clearly correlated, jobs are explaining less than 80% of the home price appreciation “story.” You can visually see that from the number of outlier dots representing MSAs far away from the line for home price appreciation that jobs alone would predict. We also looked at forecasted data for 07 compared to 06 to see what the comparison revealed. As you can see below, the fit isn’t quite as good as with the actual 05-06 data.  The R-Squared is only .02 with this data. Could this be that other factors are having much more of an impact on home prices in 2007? That’s certainly possible as unemployment has been stable and very healthy nationally. The weakness of the correlation could also have a simpler explanation—that forecasts are less than perfect. In our Market Dashboard reports, we carry the complete set of factors you need to monitor to stay on top of the health of your local housing markets. Subscribe today to one of our enhanced subscriptions, to monitor jobs and other critical economic and demographic conditions. 
We're always looking for feedback from our readers.
|
| < Prev | Next > |
|---|
