Unemployment Proves Bigger Factor in Louisville Real Estate Than Rates, Prices

Experts like Donald Trump and John Paulson have been touting the benefits of investing in real estate since October 2010. On this site, we’ve highlighted the very positive positions of the three key financial indicators for real estate:

  1. Interest rates
  2. Home prices
  3. Inventory
Chart of Metro Louisville Unemployment Rates, 2006-2011
Since late 2008, unemployment rates have jumped significantly. It is interesting that this coincides with the time frame in which Louisville real estate dropped.

Dozens of experts, from a variety of fields, have explained why real estate is a good investment now and why a turnaround is imminent. So why are our Louisville housing reports showing little to no positive movement so far in 2011?

The Future’s Uncertain and Other Jim Morrison Quotes

If I had to choose a single word to describe what is pulling down the real estate market, it would have to be unemployment.

We like to report all manner of economic statistics that have a bearing on home sales, home prices, and other real estate activity. For instance, back in November, we published Cost of Living Battle, Louisville Beats Rivals. For all the positive attributes of our city, the primary negative factor hindering real estate activity was unemployment.

So where exactly are we?

According to the Bureau of Labor Statistics, as of January 2011, the unemployment rate for Louisville is 11.1 (not seasonally adjusted). That’s not very good. In fact, it’s terrible! It puts Louisville tied for 280th among the 372 metropolitan areas tracked.

Job Recovery for Louisville

Given our current poor standing, experts are suggesting the huge potential for improvement puts Louisville as one of the top five cities in terms of employment outlook.

Earlier this month, Manpower used survey data on planned company hiring to create a report that predicts very positive things for Louisville, Lexington, and all of Kentucky.

About 19 percent of companies surveyed in the Louisville area said they expect to add jobs during the second quarter. Another 75 percent expect to maintain their current staff levels, while 4 percent expect to cut staff.

Real Estate Forecasting

Given the aforementioned positive positions of interest rates, home prices, and home inventory, it seems likely that if jobs took off, real estate activity would finally see true growth. Whether that starts 2nd quarter as expected by labor surveys, or later, remains to be seen.