Prophets See Light Ahead, but Employment Figures May Drive Market

In any year, a housing forecast needs to be taken with a grain of salt. The future simply isn't that easy to predict. Given the turmoil now roiling the economy, this year's prognostications might be better paired with a shot of whiskey.

John McClain, deputy director of the Center for Regional Analysis at George Mason University, delivers this headline: We're about halfway through the recession. The patch we're in right now is the toughest part. "The two worst quarters will likely be the quarter we're in and the next quarter," he said during a year-end presentation by leaders of local real estate organizations.

The next quarter, January through March, overlaps what is usually the time of year when people start to think about buying or selling a home, even if there's still snow on the ground.

McClain offered another straw of hope. Consumer confidence may be starting to recover.

He cited the Conference Board Consumer Confidence Index, based on a survey of 5,000 U.S. households, which shows that confidence in the economy rebounded moderately in November from the record low it hit in October. And the share of folks who expect conditions to improve rose to 11.4 percent from 9.6 percent in October.

Pardon me for not getting too excited that 11 percent of consumers anticipate better times ahead. But at least the number was heading up.

Even that glimmer doesn't translate to a strong spring for the local housing market. Six months from now puts us into June, when that peak home-sales season usually starts to wind down.

The Conference Board is scheduled to report new numbers on Dec. 30. It will be interesting to see how consumer confidence fares after a lackluster holiday shopping season, discovery of a $50 billion Wall Street investment fraud and the near-death experience of the big American automakers. We'll see if that little uptick in confidence lasts.

It's a crucial statistic because people who aren't confident about their future don't buy houses, no matter how cheap the price or how low the interest rate.

Despite a stream of job losses in construction, retail, finance, media, trade associations and state- and local-government, the Washington area still seems to be faring better than the rest of the nation. McClain cites a metro area unemployment rate that hit 4 percent in September, the highest since 2003. Our rate is up, but it's still among the lowest in the country, and new jobs are still being created.

"We are adding higher-paying jobs to replace the lower-paying jobs that we are losing in this economy," he said. Many of those high-paying jobs include accountants and lawyers and other professionals who are implementing federal bailout programs.

The availability of high-skill, high-pay jobs is faint consolation if you've lost one of those lower-paying gigs. But it helps explain why home prices and sales volume have remained more stable in pricey, close-in neighborhoods where accountants and lawyers can afford to live.