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How Dire the Property Market Will Be

Posted February 6, 2010 by Matthew Denton

Mass layoffs are hurting the industry

This week, thousands of employees were laid off from their jobs. Sure, this is nothing new to us but what’s more startling is that the once incorrigible top corporations are cutting down their workforce and pulling down the nation’s employment numbers. The result? Expect more employees to default on their mortgages. The latest casualties come from Kentucky-headquartered health insurance provider Humana which is expected to cut down 2,500 of its total employees, Ford Motor that is set to lay off 900 employees in its Michigan plant and the worst of all, aircraft manufacturing giant Boeing had to discharge almost 1,000 I.T. workers in California and Washington.

New York has been losing jobs here and there. The Metropolitan Transportation Authority is expected to discharge 450 station agents and more than 600 administrative workers. But Los Angeles is even worse. The Los Angeles Economic Development Corp. chief economist Nancy Sidhu states, “California’s economy is also on the recovery track, but the state will still lose 121,800 jobs in 2010. However, this will be a huge improvement from the 668,200 jobs lost in 2009.”

And with the rate at which things are going, It’s even harder to detect where the next lay offs will be. Last February, BusinessWeek recently tracked losing industries in terms of employment on a year-over-year basis. Among those heavily hurt were Installation, Maintenance and Repair (-0.2 percent), Management (-0.3 percent), Business and Financial Operations (-0.4 percent), Transportation and Material Moving (-3.0 percent), Sales and Related Services (-4.6 percent), Office and Administrative Support (-4.8 percent), Building, Grounds, Cleaning and Maintenance (-5.4 percent), Architecture and Engineering (-7.8 percent), Arts, Design, Entertainment, Sports and Media (-7.3 percent), Computer and Mathematical (-9.0 percent), Farming, Fishing and Forestry (-11.8 percent), Production (-14.6 percent) and Construction and Mining (-15.5 percent).

Notice how the large reductions in labor come from Construction and Architecture and Engineering – real estate’s backbones. Notice how almost industry has to do something with real estate!

Now, with the addition of other companies like Ford and Boeing, the government needs some serious plans for now. Act immediately or suffer more drastic mortgage defaults in the coming months.

Considering mortgages, our financial institutions are not in good in shape either. According to Time Magazine , “large banks continue to struggle with a huge volume of borrowers needing help. As of last month, Bank of America Corp. had completed modifications for just over 5 percent of the roughly 240,000 borrowers who started the process. JPMorgan Chase & Co. and Citigroup Inc. were also below 10 percent.”

This is certainly one tough call for everyone.

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