From the L.A. Times
“Things are clearly turning down pretty hard” for residential real estate, said Jan Hatzius, an economist at investment firm Goldman, Sachs & Co. in New York. “You’re going to have some payback from this” in the economy overall, he said.
Just how much payback is in store — and how consumer spending may be affected by the downturn — is a matter of growing debate among economists.
Many analysts believe that the economy is strong enough to avoid falling into recession even if housing continues to weaken. “You have to be careful not to exaggerate how much [housing] dampens the economy given that everything else other than the auto sector is doing well,” Federal Reserve Bank of Dallas President Richard Fisher said after a speech Monday.
But the real estate boom of the last decade has been unprecedented in size and scope, which raises the risk that the downside also could exceed forecasters’ best guesses, said Eric Belsky, executive director of Harvard University’s Joint Center for Housing Studies.
After any boom, “there’s a tendency to predict a more gradual unwinding than actually occurs,” he said.
Housing’s troubles pose two main threats: one to millions of jobs directly dependent on the business, the other to homeowners’ willingness and ability to spend if they feel poorer because of the trend in property prices.
About 10 million jobs are tied directly to residential real estate, from construction workers to escrow agents to the clerks at the local hardware store, Goldman Sachs estimates. That’s about 7% of total U.S. employment. Some analysts believe the total is closer to 10%.
Soaring job growth in construction, real estate sales, mortgage lending and related businesses helped buoy otherwise anemic employment gains from 2001 to 2004 as companies hired to meet the spectacular appetite for homes.
Goldman Sachs estimates that the housing sector nationwide could shed 1.5 million to 2 million jobs over the next several years as the industry retrenches. The result could be to reduce total U.S. employment growth to a monthly average of 100,000 jobs in 2007, from an average of 150,000 a month over the last three years, the firm said.