Only Job Growth can Save Real Estate
Despite what the stock market has done since October of last year … and recent proclaimations of “The Recession Has Ended” … many of us with real estate connections on both the Residential and Commercial side Know Different.
This Recession is FAR from over
The PAIN in Real Estate is FAR from Over
AND I think I have found some really good reasons to back that up from two different articles in the last week in the Wall Street Journal. Both report on the Massive Job Losses this Recession has caused and why even with rapid economic growth it may be nearly 10 years until we are out of the woods.
1) Start Ups and Employment
Here’s a stat for you … Did You Know That Businesses in the first 90 days of their existence account for 14% of the new hiring in the US economy? Fascinating!
AND in the third quarter of 2008 the number of new businesses launched was the lowest in a quarter since 1995.
Imagine when the burning desire to start your own business will return to our general population given the current economy. They may be our only hope with large businesses in layoff mode. AND I think the general feeling out there is that booming startups are a long way off.
2) Job Creation and the 8 Year Hole
We have lost 7.2M Jobs since December of 2007 – the steepest job contraction since before WW2.
AND the economy needs to create 100,000 jobs a MONTH to keep up with population growth.
Even if a recovery speeds job creation up to the 2.15M jobs a year we saw at the peak in the 1990’s …
Projections show we won’t reach 5% unemployment again until 2017 !!
What does this mean for Commercial Property? As if real estate didn’t have enough headaches of its own … this jobs data is a strong indicator of a large delay until markets “recover”. AND the boom days of 2003 – 2006 are likely gone for the remainder of my lifetime.
The silver lining?
With far fewer folks able to get a mortgage, Multifamily may be positioned strongly soon … just watch out for markets holding a tsunami of vacant SFR.
My two cents
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