Snakes may lurk under U.S. property ladder

By Christopher Swann

updated 12:51 p.m. ET July 1, 2005

Three years ago Mark and Kristin Carvalho abandoned their lucrative careers in management consultancy to become realtors in the simmering housing market of Phoenix, Arizona.

"Aside from the low cost of setting up as a realtor, the economics in Arizona seemed right," he says. "You have strong job growth and a lot of migration of people from California, where housing is hugely expensive, and from the Midwest, where the weather is cold."

The gamble has paid off handsomely the couple are on track to sell $20 million of property this year.

As property values have soared so has the level of interest in working in real estate. The number of realtors in the U.S. has jumped by 45 percent over the past four years to 1.1 million, and many have left blue-chip companies or even delayed college to join the property jamboree. More joined the profession last year than at any time since records began in 1975.

Add in jobs in residential construction, furniture and DIY stores and mortgage finance, and the buoyant property market emerges as the main driver of employment growth over the past four years. Economy.com, the consultancy, estimates that about a third of the 2.6 million jobs created in that period were in housing-related sectors.

This raises the question of what happens to these workers when the housing market cools.

Economists disagree vigorously about whether house prices will fall. But almost none dispute that the volume of housing activity is likely to decrease. Nearly one in 10 of the nation's single-family homes was bought and sold last year. About 900,000 condominiums were sold over the past year close to double the rate seen in the late 1990s.

Meanwhile, builders started work on 1.65 million homes in the year to May -- the highest number since records began in 1959.

Even if house prices remain high, any slowdown in this frenetic activity could endanger jobs, says Mark Zandi, chief analyst at Economy.com.

"Traditionally, the housing market has only really got into trouble when the employment situation got worse," he says. "This time we could see the reverse, with a slowing housing market acting as a drag on employment."

U.S. house prices have not fallen since the Great Depression. But jobs in housing-related sectors have quickly disappeared when the market has cooled. Between 1989 and 1991, as home sales dried up, almost 60,000 of the nation's 820,000 realtors closed shop. The profession remained in decline until 1997.

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