The unemployment rate for the past two months was finally published, so I hope to get you up to speed today. If you didn’t know, the government shutdown set EDD back, so that is what caused the delay. Here are a few graphs to not only see the job market in action, but also property values. Let’s take a look at some trends for Sacramento County, California and the United States. What stands out to you?
Here is a glimpse of jobs and values in Sacramento County over the past couple of years. The unemployment rate in Sacramento County is 8.4% (October 2013) and the median sales price is $255,000 (October 2013). This is the seasonally unadjusted unemployment rate, whereas the seasonally adjusted rate is 8.7%. By the way, if you’re riding the Bitcoin wagon right now, it looks like the median price in Sacramento County is 308 Bitcoins.
There is a tie between jobs and real estate, but the real estate market does not always fluctuate right away because of jobs. For instance, property values here in Sacramento hit bottom in early 2012, but the unemployment rate hit its peak about 18 months earlier in July 2010. This tells us it took a year and a half for the real estate market to stop declining despite unemployment beginning to trend downward. Moreover, even though joblessness has been very high, the real estate market has seen an exponential surge in values over the past 12-18 months. The driving force was mainly historically low interest rates, cash investors and low inventory – not vast improvements in the local job market. This goes to show there are many different “layers of the cake” when it comes to things that make real estate values move.
The unemployment rate in California is currently 8.3% (or 8.7% for the seasonally adjusted rate) and it’s 7.3% in the United States. The graph immediately above shows 65 years of unemployment in the United States, and it’s a good reminder how trends move up and down like a roller coaster.
Questions: What is the relationship between the unemployment rate and property value? Any thoughts, insight or stories to share? I’d love to hear your take.