“This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole.”That’s promising, but we’re still uncertain as to when the recently unemployed will be able to return to work.
Another concern: how badly will the U.S. economy be damaged if people can’t buy homes?A new concern is whether the high number of unemployed Americans will cause the residential real estate market to crash, putting a greater strain on the economy and leading to even more job losses. The housing industry is a major piece of the overall economy in this country. Chris Herbert, Managing Director of the Joint Center for Housing Studies of Harvard University, in a post titled Responding to the Covid-19 Pandemic, addressed the toll this crisis will have on our nation, explaining:
“Housing is a foundational element of every person’s well-being. And with nearly a fifth of US gross domestic product rooted in housing-related expenditures, it is also critical to the well-being of our broader economy.”
How has the unemployment rate affected home sales in the past?It’s logical to think there would be a direct correlation between the unemployment rate and home sales: as the unemployment rate went up, home sales would go down, and when the unemployment rate went down, home sales would go up. However, research reviewing the last thirty years doesn’t show that direct relationship, as noted in the graph below. The blue and grey bars represent home sales, while the yellow line is the unemployment rate. Take a look at numbers 1 through 4:
- The unemployment rate was rising between 1992-1993, yet home sales increased.
- The unemployment rate was rising between 2001-2003, and home sales increased.
- The unemployment rate was rising between 2007-2010, and home sales significantly decreased.
- The unemployment rate was falling continuously between 2015-2019, and home sales remained relatively flat.