How Unemployment Rates Affect the Real Estate Market in 2014

Unemployment rates affect the real estate market. It is as simple as that and in the D.C. Metro unemployment levels are at a sobering level. That, coupled with brutal weather in the first couple months of the year, has slowed the real estate market as 2014 gets under way. 

Just 4,800 jobs were added to the region in the year that ended in February, according to The Washington Post. That’s the most dismal figure in the region since the Great Depression.

How Unemployment Rates Affect the Real Estate Market

The Labor Department released figures that indicate the professional services sector lost 15,100 jobs positions during the year.

“It’s sobering,” economist Stephen Fuller, who directs the Center for Regional Analysis at George Mason University, told the Post. “I think it certainly underscores the vulnerability that the Washington-area economy has and has to overcome.”

The District of Columbia Department of Employment Services reported last month that the preliminary February job estimates show an increase of 1,000 jobs, for a total of 741,500 jobs in the District. The private sector gained 1,600 jobs, while the public sector payrolls decreased by 600 jobs. The numbers come from the United States Bureau of Labor Statistics.

The District’s seasonally adjusted unemployment rate in February was 7.4 percent, which is unchanged from the January revised rate. The number of unemployed District residents increased by 200 from 27,200 in January 2014 to 27,400 in February 2014.

A federal budget deal crafted in December means there shouldn’t be any significant spending cuts (jobs) or tax hikes this year.

Meanwhile, the median price of a single-family home in the Washington, D.C., metro area in February was up 8.1 percent from February 2013, and up 0.6 percent from the previous month. In the District, the annual gain was 8.4 percent.

Across the country, the number of home sales should slowly pick up this year, according to the National Association of Realtors. Lawrence Yun, NAR chief economist, said conditions remained stable from January to February.

“We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” Yun said. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

The National Association of Realtors expects home prices and sales to continue on the upswing throughout the rest of the year in the D.C. Metro area. The Washington-based association forecasts existing home prices to inch up 6 percent in 2014. In 2013, the increase was 11 percent. It also expects long-term mortgage rates to reach 5.4 percent by the end of 2014.

"Although prices should remain strong in the near term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply," said CoreLogic chief economist Mark Fleming.