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Friday, October 14, 2005

Which Regions Would Be Hurt Most from a Housing Slump?

BusinessWeek Online looks at which areas of the country are most vulnerable to a slowdown in housing:

Where A Slump Would Hurt Most, BusinessWeek Online: ...If the housing market turns south, where is the economic damage likely to be the greatest? ... the greatest economic impact may not come where prices slide the most. Instead, the regions that see the most pain probably will be those where homebuilding has been a major source of new jobs. A decline in housing could accelerate job losses in the entire local economy ... The most vulnerable spots, according to a new analysis by BusinessWeek, include the Riverside-San Bernardino (Calif.) region -- the so-called Inland Empire east of Los Angeles -- San Diego, Phoenix, and Las Vegas. In each of these areas new jobs in construction accounted for over 20% of total payroll growth in the past year, vs. a national average of 10%. This measure counts more than just housing construction. ... In the East, regions that depend heavily on construction employment for growth include Tampa-St. Petersburg and greater Baltimore. In Newark, N.J., and in the nearby wealthy New Jersey surburbs of New York, rising construction employment is partially masking a decrease in other kinds of jobs. ... Surprisingly, some of the areas that have seen the biggest runup in housing prices aren't overly vulnerable to a homebuilding slide. ... Construction in these coastal cities has been constrained by severe zoning restrictions, along with a shortage of open land. ... Other regions would also come through a housing downturn relatively unscathed. Most Texas cities, for instance, are doubly insulated from a downturn. Housing price hikes been moderate, and construction is a small part of payroll growth ... Contrast that with housing's role as an engine of growth in Southern California's Riverside and San Bernardino counties, which stretch east to the Arizona and Nevada borders. Thanks to inland prices that are far cheaper than those along the coast ... construction is hopping. Subdivisions are being erected by the score in former citrus groves and dairy farms. ... While construction by itself accounts for 33% of new jobs in Riverside and San Bernardino, that share reaches 39% when jobs in lending, real estate commissions, renting, and leasing are included. And it's not just roofers and real estate agents who are finding work plentiful. Also raking it in are small businesses catering to the trend, such as Taylor's Appliance in Riverside. The family-run retailer has added 16 new employees in the past five years, bringing the total to 48... Regions that are heavily dependent on housing for employment growth will suffer more than most when a downturn comes. ... Falling home values are no fun anywhere. But if you want to know which metro areas will really take it on the chin when prices stall out, look for the ones whose jobs depend on it.

    Posted by on Friday, October 14, 2005 at 02:06 AM in Economics, Housing, Unemployment | Permalink  TrackBack (0)  Comments (12)

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