Housing Bubble Burst Blows Away 1 Million Jobs?

According to a report in The Seattle Post Intelligencer, a housing bubble burst has the potential to cost the economy over 1 million jobs.

The dire warnings aren’t region-specific — beyond hitting most places where home values have appreciated most. But many experts on the Seattle-area economy have suggested that the elements of a classic bubble — one in which prices could be expected to suddenly reverse directions — aren’t apparent here.

Not that a sudden drag in the national economy wouldn’t be felt here, perhaps at least flattening the 10 to 15 percent gains housing prices have shown annually in recent years.

If housing prices decline sharply nationally, the effects could be broad. Lehman estimates that one-third of the past year’s economic growth was a consequence of the housing boom. Housing construction is equal to 5 percent of the national economy.

A downturn in housing could mean more than 1.3 million lost jobs, Goldman Sachs Group Inc. predicts, bumping up the national unemployment rate by 1 percentage point and the unemployment rate in house-mad California by 2 percentage points.

If the bubble bursts, which I doubt personally, as we have stated there will be a deflation, not a burst. The effects will be felt the most in the areas where prices have a risen dramatically, not the majority of the country.

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