Monday, March 20, 2006

The Start of The Downward Spiral

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A story this weekend in USA Today tells of the hard times to come as the slowdown in housing echoes through the economy.

Here's an excerpt:
"You saw it — there were dollar signs in their eyes," recalls Nick Vayonis, a former real estate agent in Los Angeles, where median home prices rose 145% in four years. (Graphic: Impact of housing-related jobs)

He left the business a year ago, just in time, he says. Home sales have declined nationwide for the past five months, and sales in Southern California fell to their lowest level in five years in February, DataQuick reported Tuesday.

"I could see the ebb and flow. It wasn't going to be like that forever," says Vayonis, 40, who just opened a coffee shop in Canton, Ga., near Atlanta with his wife Ann-Marie, also a former agent.

As the housing market slows, there will likely be a lot of stories of people who are bailing out of their real estate jobs and other professions related to housing — appraisers, mortgage brokers and home construction workers — and many not by choice. This could send shock waves through the job market and the economy.

That's because housing helped drive the economy out of the last recession. Almost four out of every 10 jobs created in the past four years were in housing-related fields. At the end of last year, a record 9.8% of U.S. workers were employed in the real estate industry, up from 8.2% a decade ago, according to Moody's Only the health care industry added more jobs.

"Job growth is the main engine for consumer spending," says Scott Anderson, senior economist at Wells Fargo in Minneapolis.

— The Boy in the Big Housing Bubble