How Will Rising Unemployment Affect the Oklahoma Real Estate Market

How Will Unemployment Affect the Oklahoma Real Estate Market? 

We have had ten million Americans who have lost their jobs over the last few weeks. In the past three weeks, the Oklahoma Employment Security Commission has received more than 135,000 unemployment claims. The unemployment rate will be announced again on May 8th, which is expected to be in the double digits. Because the Coronvirus…this health crisis brought the economy to a screeching halt, many, of us here in Oklahoma and throughout the Tulsa Metro area are feeling a personal financial crisis.  The government is working to provide hope and options for people in Oklahoma and throughout the United States. James Bullard, President of the Federal Reserve Bank of St. Louis, explained that the government is trying to find ways to assist those who have lost their jobs and the companies which were forced to close (think: your neighborhood restaurant, your local boutiques). I have used this quote before, but remember In a recent interview he said:

“This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole.”

So that is promising, but we’re still uncertain as to when the recently unemployed will be able to return to work.  

Governor Kevin Stitt extended his safer-at-home executive order through April 30, to match that of President Donald Trump’s. Gov. Stitt added new provisions to include the closure of non-essential businesses in all 77-counties.  Knowing when our country and Governor Stitt will start easing on the safer-at-home orders remains to be seen.  

Another concern: how badly will the U.S. economy be damaged if people can’t buy homes?

A new concern is whether the high number of unemployed Americans will cause the residential real estate market to crash, putting a greater strain on the economy and leading to even more job losses. In the Tulsa Metro area the housing market was strong before COVID-19.  We were saying home prices increase, days on market decrease, and months supply of inventory dwindle. And although the Oklahoma real estate market has slowed, there is still strong demand. The housing industry is a major piece of the overall economy in this country and in Oklahoma.

Chris Herbert, Managing Director of the Joint Center for Housing Studies of Harvard University, in a post titled Responding to the Covid-19 Pandemic, addressed the toll this crisis will have on our nation, explaining:

“Housing is a foundational element of every person’s well-being. And with nearly a fifth of US gross domestic product rooted in housing-related expenditures, it is also critical to the well-being of our broader economy.”

So with this question about housing and rising unemployment rates we should be asking…How has the unemployment rate affected home sales in the past?

So It’s logical to think there would be a direct correlation between the unemployment rate and home sales: as the unemployment rate went up, home sales would go down, and when the unemployment rate went down, home sales would go up.

Surprisingly, research reviewing the last thirty years doesn’t show that direct relationship, as noted in this graph. So the blue and grey bars represent home sales, while the yellow line is the unemployment rate. Let’s take a look at numbers 1 through 4:

  1. The unemployment rate was rising between 1992-1993, yet home sales increased.
  2. The unemployment rate was rising between 2001-2003, and home sales increased.
  3. The unemployment rate was rising between 2007-2010, and home sales significantly decreased.
  4. The unemployment rate was falling continuously between 2015-2019, and home sales remained relatively flat.

So what this is showing us is the impact of the unemployment rate on home sales doesn’t seem to be as strong as we may have thought.  

So what we keep hearing is isn’t this time different?

And Yes. There is absolutely no doubt the country hasn’t seen job losses this quickly in almost one hundred years. How bad could it get? Goldman Sachs projects the unemployment rate to be 15% in the third quarter of 2020, flattening to single digits by the fourth quarter of this year, and then just over 6% percent by the fourth quarter of 2021. Not ideal for the housing industry, but manageable.  Our Oklahoma housing industry is still going.  

How does this compare to the other financial crises?

We have plenty of people throwing around that this is going to be reminiscent of The Great Depression. Looking from the standpoint of unemployment rates alone (the only thing I am addressing, we are talking about unemployment rates), it does not compare. Here are the unemployment rates during the Great Depression, the Great Recession, and the projected rates moving forward:

So the bottom line

These are the facts as we know them. The housing market will have challenges this year. However, with the help being given to those who have lost their jobs and the fact that we’re looking at a quick recovery for the economy after we address this health crisis, the housing industry should be fine in the long term. 


Stay safe.  Enjoy your family and as always reach out to me if you have any questions or want to analyze your current situation.  We will get through this and I am here to help you along the way!

How Will Unemployment Effect the Oklahoma Real Estate Market
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