Housing vs. Unemployment

Mark Knoll, chief economist with the Utah Department of Workforce Services, has another podcast with some very interesting information. Its a good listen if you have a spare 10 minutes.

There were some particular points I wanted to mention.

First, the rise in unemployment, now at 5.2% in Utah, is slowly increasing as has been anticipated. Mark expects the increase to slow down later this year and possibly start improving early into next year. I recently heard another analysis that expects our unemployment "peak" to be in April of 2010.

Second, the unemployment is hitting the lowest ends of the skilled work force the hardest. Here are the numbers of new unemployment claims based on the highest level of attained education:

So almost 75% of those being laid off are high school drop outs or simply a graduate of high school.

What does mean to the housing market? For starters, it is putting big pressure on the rental market. Folks who dropped out of school are very likely to be renters. However, if they are out of work, they can't afford to live in a place on their own. They move in with friends or their parent's basement. They effectively withdraw from the market, therefore reducing demand, and that increases vacancy rates and puts pressure on landlords to lower rents. High School graduates are also part of the renter camp but not as much so. Still, the large number being laid off affects rents as well. As far as they are home owners, they will likely end up selling or foreclosing on their home if a job loss occurs.

Look for downward pressure on rents for the next 12 months as unemployment increases. Landlords would be wise to get leases that will keep tenants in their property through April 2010.