According to the UCLA Anderson Forecast, California’s economy will continue to grow in the coming years – but the pace will slow alongside a sluggish economy on the national level. The Bureau of Labor Statistics states that the California unemployment rate is at 4.3% as of March 2019.
What will a slow jobs report mean for California Real Estate in 2020? Let’s take a look at how jobs impact real estate and what the future will bring.
3 Ways a Slow Jobs Report Will Affect California Real Estate
Employment is one of the biggest indicators of the state of the housing market. Home sales are directly tied to the health of the economy and they rise and fall with economic activity.
The unemployment rate is one of the most closely monitored statistics, because a rising rate is seen as a sign of a weakening economy and might call for a reduction in interest rates.
There are several ways slow employment growth affects real estate. Here are three of the most significant factors:
1. Reducing the Money Supply
As the economy slows and employment drops, the supply of money becomes more restrictive. Without a paycheck, people can’t afford to buy or rent houses. Money will become harder to borrow, meaning fewer home buyers will enter the housing market. Inventories of homes will go up and homes will take longer to sell.
2. Low Demand for Commercial Real Estate
A decrease in jobs also lowers the demand for other types of real estate. Without work to provide jobs, a business has no need to purchase and occupy commercial real estate. This includes retail spaces, office suites, warehouses or land for development.
3. Increase in Foreclosures
When employment dips, there is also an increase in the number of homes entering foreclosure. When homeowners lose their jobs, they may be out of work for several months. This can cause them to fall behind on mortgage payments and enter foreclosure. According to recent statistics, in February 2019 banks repossessed 11,392 properties in the USA.
The Future of California’s Housing Market is Strong
The good news is that although job growth in California is slow, it’s still growing. There is no indication that the market will crash anytime soon. In fact, it’s currently more stable than it was in the past.
California’s economy is expected to dip slightly in 2020 and then enjoy an upward push in 2021. High employment and rising wages will fuel rising home prices. The Mortgage Banking Association states that peaking millennial demand and mortgage interest rates will keep home sales growing over the next five years.
Real estate will always be a good long term investment. Even though the housing market will fluctuate, in the long run a property will almost always appreciate.
To learn more about California real estate, contact our team.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. Article by Sparkling Marketing, Inc.