As we’ve seen from the most recent round of foreclosures, employment is tightly linked to housing demand. It’s tough to afford a home, much less build a new one, when you don’t have a job. When unemployment is high, even the employed don’t feel confident about the future. Moreover, job growth correlates directly to new household formation, the key underpinning of new-home demand. Unfortunately, the national outlook for employment remains tepid. Unemployment nationally is expected to improve only slightly in 2011. At current rates of job growth, it will take several years to replace the jobs lost during the last recession. Nationally, the economy needs to create 300,000 jobs a month just to sustain full economic recovery.
That said, the employment picture is starting to brighten in select markets throughout the country. Many markets—from Washington, D.C., to Raleigh, N.C., to the major cities in Texas—had relatively strong years on the job front. Not surprisingly, those markets showed more strength in housing as well.
In 2011, the healthiest markets are producing jobs at a faster pace and have unemployment rates well below national figures. Perhaps most important, the best markets will produce thousands of jobs in 2011 and will have lower unemployment rates. Next month we’ll look at part 3: consumer demand.
The better large markets for housing in 2010 had lower-than-average unemployment. The outlook for 2011 shows most of these markets with even lower rates by the end of the year. A notable gainer is Minneapolis, which is expected to leapfrog Washington, D.C.