It's the jobless rate, stupid
Don't be fooled by the latest round of sunny local housing numbers.
The Massachusetts Association of Realtors is touting a big year-over-year jump in sales and prices for the first quarter.
The numbers look so good because of two things - early 2009 was so bad and because we are seeing the impact of all that artificially generated tax-credit demand.
Here's one telling stat. Homes sales, after peaking last November when the first round of tax credits looked ready to expire, began to fall off on a month-over-month basis. But they shot up by more than 53 percent in March. Some of this is seasonal, but the rush to buy and sell before the tax credit extension expires - as it now looks like it will on Friday - has to be factored in as well.
But if you are wondering where home prices are headed, the real number to follow is the unemployment rate, Calculated Risk notes.
Basically, during a downturn, the unemployment rate soars while prices plunge. The real estate market only begins to stabilize after the unemployment rate peaks.
Yes, the state and national jobless rates have shown some modest signs of improvement over the last month or two.
But it's also pretty clear, from looking at this chart, we are dealing with both a much higher level of unemployment and a much steeper fall in housing market than in the early 1990s
Given the size of housing bubble that burst, there is likely to be a longer overhang here - expect another 10 percent drop in prices this year, according to Calculated Risk.
