How Will Unemployment Affect The Real Estate Market?
It is easy to observe how and why unemployment levels have an impact on the housing market and other sectors of the economy. To state the obvious, the people without an income and aren't economically independent will not have the money available to purchase goods and meet monthly bill payments. The individuals who do not have available funds are likely to lose their home or be unable to purchase a house in the first place. This adds unoccupied homes to the housing list, which will contribute toward a reduction in house prices.
Despite a number of government projects to help stimulate the economy by helping house owners being instigated, a lender is highly unlikely to negotiate on any loan repayments if the debtor can't demonstrate how they can afford to pay in the future. This means that foreclosure is very likely and a high number of foreclosures are not at all good for the market.
Another, less direct manner in which unemployment could have a negative effect on the housing market is through the effect that the unemployed have on the economy. Those without an income have less or no disposable cash to spend, meaning that they purchase less from shops and other outlets. This in turn reduces the revenue that is taken by commerce which could lead to redundancies or even business closure. This in turn means that there is even less money available on the market for things like home purchase.
On a more localized level, high unemployment levels in a particular region could cause increased crime rates. Any region with high crime rates is less attractive to potential buyers and therefore the price of the housing is adjusted downwards to compensate for this lower demand.
Even those who have a job may not be confident concerning their future in an economy that is seeing increasing unemployment figures. Due to this they may decide to wait until a bad economy stabilizes and improves before making any large purchases, houses included. One more factor could be that in a negative economy people expect house prices to decrease, and thus decide to wait until the market levels out so that they could get the best available price.
Those who do have jobs and a disposable income are more likely to maintain and invest in their houses. Home improvements such as re-decorating and building extensions would always have a positive result on the desirability of a home and nearly always push the price up relative to its location. With fewer people making such home improvements, or possibly even seeing their homes fall into disrepair because of a lack of funds the overall desirability of homes, and therefore the amount that a buyer would be ready to pay for them would decrease.
Since unemployment levels are so closely linked with the housing market, it is usually one thing that's looked at when economists attempt to forecast housing prospects, and a factor that people usually take into account before choosing whether or not to go on with a purchase.
Despite a number of government projects to help stimulate the economy by helping house owners being instigated, a lender is highly unlikely to negotiate on any loan repayments if the debtor can't demonstrate how they can afford to pay in the future. This means that foreclosure is very likely and a high number of foreclosures are not at all good for the market.
Another, less direct manner in which unemployment could have a negative effect on the housing market is through the effect that the unemployed have on the economy. Those without an income have less or no disposable cash to spend, meaning that they purchase less from shops and other outlets. This in turn reduces the revenue that is taken by commerce which could lead to redundancies or even business closure. This in turn means that there is even less money available on the market for things like home purchase.
On a more localized level, high unemployment levels in a particular region could cause increased crime rates. Any region with high crime rates is less attractive to potential buyers and therefore the price of the housing is adjusted downwards to compensate for this lower demand.
Even those who have a job may not be confident concerning their future in an economy that is seeing increasing unemployment figures. Due to this they may decide to wait until a bad economy stabilizes and improves before making any large purchases, houses included. One more factor could be that in a negative economy people expect house prices to decrease, and thus decide to wait until the market levels out so that they could get the best available price.
Those who do have jobs and a disposable income are more likely to maintain and invest in their houses. Home improvements such as re-decorating and building extensions would always have a positive result on the desirability of a home and nearly always push the price up relative to its location. With fewer people making such home improvements, or possibly even seeing their homes fall into disrepair because of a lack of funds the overall desirability of homes, and therefore the amount that a buyer would be ready to pay for them would decrease.
Since unemployment levels are so closely linked with the housing market, it is usually one thing that's looked at when economists attempt to forecast housing prospects, and a factor that people usually take into account before choosing whether or not to go on with a purchase.
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