Hurricane Sandy may be long gone, but she has done some serious damage to the nation’s unemployment rate. According to the Labor Department, the superstorm drove weekly unemployment aid applications up to 439,000 – the highest we’ve seen in 18 months. How do we know that Sandy is to blame?
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There are a couple of reasons. First, the most of the additional 78,000 applications came from states that were impacted by the storm. Second, unemployment benefits don’t just kick in when you get laid off. You can also ask for them if your business shuts down even on a temporary basis – like it would, for example, after a storm. While some of the Sandy-related jobless will head back to work once their employers can re-open for business, the Labor Department says it expects the unemployment numbers to remain high for another two weeks. Just how high are we talking? Sandy has created such a disturbance that the U.S. hasn’t seen unemployment numbers this high since mid-2010. What did the housing market look like back then? In the summer of 2010, some experts were warning against buying altogether, even though interest rates were relatively low and selling prices were also very low. Rent prices were also low, though (much lower than they are today), so renting made more sense back then. And, remember, we have taken some steps towards recovery since then. Selling prices have gone up slightly, and interest rates have dropped even further – which makes buying much more attractive today than it was back in 2010. So, what kind of effect will these new unemployment numbers have on the housing market?
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After all, the housing and job markets go hand in hand. If people don’t have paychecks coming in, they’re not going to go out and buy houses. Or, they’re not going to be able to make the payments on the houses they do have, and they’re going to go into foreclosure. The foreclosure problem shouldn’t become a major issue for people affected by Sandy, even in light of these unemployment numbers. That’s because many of the big lenders in the Northeast have already said that they would be willing to work with homeowners who were affected by the storm – like accepting mortgage payments late or starting foreclosure proceedings later than normal.
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The Northeast’s housing market may not come through quite as unscathed, though. Sandy’s aftermath could stall home sales for awhile – even if it’s just due to storm damage that has to be repaired before houses can pass inspection and be sold. Now, when you add unemployment into the mix, it creates another potential problem. And, remember, the housing market in the Northeast was somewhat flat even before Sandy came barreling through. Median sales prices hadn’t made any major changes (up or down) in months, and as of mid-October, there was a fairly large “shadow inventory” (or, the number of homes that had been foreclosed upon, but hadn’t been put on the market yet). Of course, the Northeast isn’t the first place to go through a major storm and have it affect the housing market. After Hurricane Katrina in 2005, mortgage rates fell slightly. However, Katrina was a much bigger storm with a much bigger impact. But, 2005 was also the height of the housing boom – meaning that our economy was better-equipped to deal with a disaster. The nation’s housing market continued to thrive, even after Katrina. Sandy came along and kicked us while we were down, so to speak. That means we’re going to have to deal with the effects for quite awhile.
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