Today we are going to look at the unemployment market indicator in our series on market indicators when it comes to real estate timing.
Unemployment as a real estate indicator is taken from the unemployment rate. This is expressed as a percentage. This is quite common in the news media, we’ll see the national unemployment rate or the unemployment rate for a particular area. For example, the unemployment rate for the state of Michigan in May was 14.1%, in other words, 14.1% of the available workforce was jobless in May.
Clearly when it comes to demand for real estate the lower the unemployment rate the better. After all if a market is shedding a lot of jobs, not too many people are going to be looking to take on the commitment of a mortgage. With real estate timing and real estate trends, unemployment is a longer term indicator. This means that in the short term trends may temporarily act contrary to unemployment data. You might see this happen in the case where a previous surge in employment resulted in an overbuild of housing which caused a temporary surplus.
It’s important that we look at the actually unemployment data for a particular MSA not just state level or regional or even national. Real estate markets are local so when it comes to real estate investing we need to focus on the local real estate trends.
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