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Photo by Deborah Metzig - Jim Doyle, chair of Northeast Florida Builders Association Sales and Marketing Council, with Carole Zingone, president of the Northeast Florida Association of Realtors, and John Tuccillo, chief economist for the Florida Realtors.
Jax Daily Record Monday, Jun. 17, 201312:00 PM EST

Realtors' economist: Job growth 'barely' keeping pace

by: Mark Basch Contributing Writer

Real estate professionals may look at a lot of housing data to gauge the outlook for the market, but as far as John Tuccillo is concerned, there is one economic indicator that trumps them all.

"There is no way you can have a prosperous business without a strong employment picture," Tuccillo said Friday at a breakfast meeting with members of the Northeast Florida Builders Association and Northeast Florida Association of Realtors.

"It's the most important thing to you," said Tuccillo, chief economist for the Florida Realtors and a former chief economist for the National Association of Realtors who now runs his own consulting firm in Sarasota.

He said the U.S. economy needs to add 150,000 net new jobs every month to keep up with the growth of the labor force and last year, it added 156,000 per month.

"We've kept up with the growth of the labor force, but just barely," he said. "That's the key. That's the whole story."

Tuccillo said the labor market needs new businesses and new industries to create new jobs, like during the technology boom of the 1990s.

"We don't have that now," he said.

Tuccillo said manufacturing businesses are making a comeback but that doesn't necessarily translate into an increase in jobs, because of productivity gains.

That means people who have been unemployed for a long time will continue to have trouble finding jobs.

"There is a real chance they will remain unemployed because we're very productive," he said.

Although it may not be the important data, Tuccillo said housing market indicators are looking positive.

"What should be going up is going up, what should be going down is going down," he said.

Indicators such as inventory and number of days a home is listed are falling, as they should in a positive market, and sale prices are rising.

However, Tuccillo does not look very closely at median sale prices as a market indicator.

"I don't think that real estate prices are the right metric," he said.

An increase in sale prices means people are buying higher-priced homes, not that the overall values of homes are rising, he said. He thinks unit sales are a better indicator of the market.

However, he thinks home values in Florida will soon be increasing at their normal historical rate.

"Homes will increase in value starting at the end of this year into 2014," he said.

Tuccillo said the Florida real estate market was turned around not by individual homebuyers returning to the market but by investors buying homes in bulk.

"The good news about that is investors saved Florida," he said. "We would have recovered, but we would have recovered three or four years later."

The bad news is that these investors will probably hold on to these properties for seven to 10 years before selling, renting them out in the meantime as they wait for prices to appreciate.

"These are basically slow-motion flippers," Tuccillo said.

He said the key to moving individuals back into the market is access to mortgage loans.

"It's generally a harder market for potential owner-occupiers to finance homes," he said.

Tuccillo thinks homeowners will need help from lawmakers and regulators to open up the financing market.

New rules require lenders to raise additional capital to guard against risky loans, and that is making banks reluctant to lend to some borrowers.

"Financial institutions are behaving rationally," he said. "The problem is the incentives (to make loans) are perverse."

Tuccillo said he often is asked if there will be another housing bubble in the coming years.

"The answer is history never repeats itself," he said. Instead, "we'll make a new mistake. I don't know what it is."

However, Tuccillo is optimistic about the market for the near term.

"Generally it's positive and I think it's going to remain positive through 2014," he said.

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