How can values be increasing when unemployment is so high?

Does it seem odd to you to see the market so “hot” right now when unemployment is still so high? During the real estate “boom” in previous years, the unemployment rate was closer to 5%. Even though the current unemployment rate is 10.2% in Sacramento County, we are seeing values increase. On paper it would seem critical to see unemployment decrease to see the market improve exponentially, but factors such as historically low rates, incredibly low inventory and heightened investor activity are driving the market right now – despite needed job growth. This begs the question: How would the market really be doing without so many external factors giving it a boost?

Unemployment Graph by Sacramento Home Appraiser Blog

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Comments

  1. says

    In a real estate market, like Sacramento, I would believe non-residents would be investing in the area. I’m curious if you are seeing investors, even foreign investors, coming into the housing market there?

    • says

      Hi Joe. Investors have been investing in the area on a massive scale. For instance, the percentage of cash has increased by 6% this year alone in Sacramento County throughout 2012. However, under $200K the percentage of cash deals is at 48% (increase of 11% over the year). We have many out-of-town investors and hedge funds in the market right now. I see some foreigners, but I haven’t heard of a major foreign group purchasing in bulk. Thanks for stopping by. Is Philly the same?

  2. says

    I actually have heard of major foreign investors coming in to our area and investing. Just a month ago I had a conversation with a friend of mine from Mexico City who came out here 2 years ago with a group of business partners scouting the area to start doing some massive real estate investing. They choose not to move forward but I have (through the grapevine) have heard that the money here is backed from some major players overseas. Now as for any hard facts… I cannot give you that. 😉

    • says

      Very interesting Meghan. Thanks for sharing. If you ever hear some hard facts, do let me know. I have seen a sporadic foreign investor here and there, but I’ve not seen one big group. Thanks again.

  3. sandy duncan says

    hi ryan,
    not much information in main stream media regarding WHO are buying these homes, just that home sales are up by a small percent, i hear this glowing report every week on Nightly Business Report (NBR). and i too have questioned why would home sales be up when the unemployment rate is up ???… NBR seems to have made a intentional effort not to try and explain this misalignment. no one in main stream media seems to want to say what should be obvious-that home sales are up because wall street(big investors) is buying them on the cheap, and RENTING THEM aka REOs to the folks who they forclosed on. as a real estate agent you probably know that as mortgage interest rates went down rent skyrocketed. as for the shortage of inventory this is again wall street trying to manipulate the housing market. i have been told by several agents that there is in fact plenty of inventory, but to artifically inflate home values wall street is slowly releasing this inventory on to the market-less supply more demand i.e. higher price for home sales and more profit for wall street. we have all heard many times that there are tens of thousands of homeowners/homes that have not completed the forclosure process , when they do those homes will be additional inventory…they will be slowly released on to the market or rented. wall street will do this until the economy has strenghtened (perhaps 7 to 10 years from now) and then they will put the remaining inventory/rentals back on to the housing market when home values are much higher. main stream media seems to be controlled by wall street too apprently. who knew!;) a friend has had a condo in forclosure in s. cali for a year and many of the condos in her complex are in the same boat. two foreign inverstors (middle eastern) came with a list of condos that they were going to buy in bulk (no grapevine, saw it with my own eyes in fact one showed me the list). cali will be a land of renters- this will mean that there will be far to many folks who may likely feel like they have no stake in california’s future as they can just give a 30 day notice and leave. all very sad. thanks for being a voice of reason ryan 🙂
    sandy:)
    ps how can one find out if large numbers of homes are being bought by corporate investors or foreign investors? does the state or fed keep any record of this? if so is a public record? thanks again.

    • says

      Hi Sandy. Thank you so much for your comment. The thing that concerns me is that some of the positive growth in the market is really due to external forces like low interest rates, low inventory and outside buyers making an impact. There is really no way I know of to find out institutional buyers in the market without simply listening to what others are saying and looking for patterns in data. I know that’s how I began to see Blackstone in the market. I saw a particular company showing up on Tax Records quite a bit. I started to ask investor friends who this company was, and sure enough they all said the same thing. Investors will make huge money this time around so long as the market goes up. It’s always a bet, and there is always risk involved, but they’re going to make a killing if they’re right.

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