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If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound," said Eric S. Belsky, executive director of Harvard's Joint Center for Housing Studies. Jobs keep homeowners out of foreclosure and help others feel confident enough to buy. see chart

Monthly employment gains in May were the highest in a decade but point to a still weak private sector. Most hiring was due to the census project and like the tax credits and support for the secondary markets, the transition back to the public is key.

Defaults Cycle Through The Economy
Morgan Stanley report that 12% of mortgage defaults in February were strategic, other estimate an even higher These strategic defaults do put money back in the hands of home owners who are paying down credit card and other consumer debt. But more housing supply added to the marketplace only drives prices further down and further reduces confidence as buyers hold back and seek the bottom. This negative feedback loop only creates more uncertainty and weakness and more price declines.

Who Wins
Apartment owners will benefit from defaults as former owners become renters. Vacancy rates for all apartment buildings with 5 units or more declined to 12.1% from 12.5% in the previous quarter, according a National Multi Housing Council (NMHC). The national vacancy rate dropped to 7.2% from the prior quarters 8.2%, the lowest level for first quarter vacancy rates since late 2008.

According to a recent Marcus Milliahap study, by 2012 or 2013, the apartment sector will benefit from echo boomers which should contribute to rent growth. A Harvard study indicates that immigration combined with the echo boomers will create a young market equal in size to the boomer generation., creating a new market potential and certainly a greatly expanded renter pool. Now thats huge!

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