The simple rule of thumb is that when unemployment gets higher than eight percent the market is headed for a fall or is already falling. When unemployment is below five percent the economy is stable and the first time home buyer market is running at an acceptable level.
As covered in a previous article “Qazzoo reviews what causes a Housing bubble” we explored the connection between a first time home buyer market and how it affects the rest of the market. To clarify: if the first time home buyer is not buying the secondary move up buyers are stuck with an asset that they can either rent or remain living in. most people need to sell as the equity in their primary residence is one reason they are able to afford their larger more expensive new home. Renting is not an option for people that need to use the equity they have built. There are many exceptions but for everyone that can afford to rent and move up there are hundreds that cannot afford to move up without the equity.
This creates stagnation in the real estate market and that stagnation is likely to become a down turn. This is one reason that we watch the unemployment rate in the country as closely as we do. Unemployed people are rarely in the market for a new home. The three biggest reasons for foreclosures are
The number one reason is the same as the reason for being in or out of the housing market. Employment has got to be balanced with wages but the first thing is to be sure that when we are buying a house that the local economy has jobs and that we are not above an unacceptable level of unemployment. We can agree or disagree on what causes unemployment but we should all be able to agree that employed people are more likely to buy a home even if it is smaller than they would like or that they feel that should be able to buy. The tax benefits are too great to remain in a rental if two or more people have to come together to buy a first time home.