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Monday, Oct. 8, 2007 | Local economists are growing increasingly concerned about the effects of the slumping housing market on the health of the general economy, as real estate and construction sectors continue to contract payrolls and consumer confidence dwindles.
But of greater concern, they say, is how amorphous the trouble is — government payroll data could only be showing part of the unemployment picture. Among those factors: an assumption that much of the region’s construction work was completed by undocumented day laborers. But more significantly, they consider the fact that self-employed workers greatly populate many real estate related professions. Many in that situation still claim employment as a Realtor, for example, despite a diminishing number of transactions taking place in the current market.
“When you look at the employment numbers for real estate they’re actually much too low,” said Kelly Cunningham, chief economist for the San Diego Institute for Policy Research, the think tank funded by potential San Diego mayoral candidate Steve Francis.
“Independent agents are probably still considering themselves employed,” he said. “But if they haven’t had any income for a while, are they still employed? As far as we know, as far as the government knows, they’re still employed.”
As residential real estate boomed earlier this decade, so did the number of people employed in related jobs, according to statistics from the state’s Employment Development Department. Between August 2002 and August 2006, industry employment in the financial services sector — comprising many real estate and mortgage jobs — grew by nearly 7,800 jobs to 83,500 in the county, a 10.3 percent increase. In the same period, construction employment ballooned by 16,800 jobs — a 21.4 percent increase.
But now, financial activities and construction are two sectors showing the biggest losses of jobs compared to the previous year. This August, financial activities logged a 1,900-job loss compared to August 2006. Construction lost 5,200 jobs in year-over-year comparison.
For the people who still claim employment as Realtors, the pie is getting smaller. From 2000 to 2007, membership in the San Diego Association of Realtors nearly tripled from about 4,200 to 11,424 members.
But the number of homes selling in the county has declined from about 24,000 in the first two-thirds of 2000 to about 18,000 in the same period this year.
That means there were an average 5.81 transactions per SDAR member in 2000. That figure has dipped to about 1.59 transactions per SDAR member this year, a 73 percent decline. With fewer transactions closing in the county in the current market conditions, more agents are fighting for pieces — and the commissions that come with them — of a smaller pie.
SDAR’s membership doesn’t include every real estate agent or broker in the county, nor do the transactions in the multiple listings service cover all transactions, notably missing new construction sales. But the comparison yields a glimpse into the amount of work out there for individual licensed agents and brokers.
“That’s probably not showing up in job loss,” said local economist Alan Gin, professor at the University of San Diego. “They have lost in terms of income but they’re still employed.”
Another piece of the hypothesis that the losses in real estate jobs are underreported is the theory that a significant portion of construction jobs for new housing and renovations were filled by undocumented day laborers who don’t factor in the state’s employment statistics. If those jobs are lost, therefore, they don’t count toward the state’s unemployment statistics because government statistics only count jobs held by legal residents. Of course, such underreporting in a downturn corresponds to underreporting of growth a few years ago, Gin said.
“The big question, though, is how significant are these situations?” Gin said. “Is the situation only a little bit worse or is it a lot worse? I’m inclined to say it’s only a little bit worse.”
While there have been an average of less than two transactions closed per member of the San Diego Association of Realtors so far this year, the commercial sector has fared better. Even in unimpressive economic conditions, agents for the buying, selling and leasing of commercial and retail space can find work, as companies downsize or consolidate office space to cut costs.
But while the grass looks greener on the commercial side of real estate, the transition to a commercial real estate agent isn’t as easy as trading open house signs for office amenity brochures. Commercial real estate experts say the fence remains between the two sectors, though they expect there might be some hopeful ex-residential real estate workers looking to hop it.
Robert Vallera, a principal with Commercial Realty Advisers, a local commercial real estate firm, said the transition sounds easier than it might be.
“There is a little bit of shuffling around,” Vallera said. “We had a former residential mortgage broker in our offices, out job hunting, looking for a job at a commercial real estate brokerage.”
But among the people losing their jobs now on the residential side, Vallera said he doesn’t expect many will stay with real estate as a profession, whether on the residential side or the commercial side.
“The ones who come in during the very tough times, they tend to last,” he said. “But the ones who break in during the easy times — when the going gets tough, they bail out.”
Cunningham said the uncertainty makes diagnosing the economy’s health difficult. The most recent unemployment rate estimate, at 4.8 percent, is “reasonable,” he said.
But if that number doesn’t count all of the real estate jobs lost in recent months, “it kind of makes you a little nervous,” Cunningham said. “I think it’s not giving us the whole picture.”