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By Jeremy Glaser and Robert Johnson, CFA | 09-19-2012 11:30 AM

Johnson: Housing Recovery Has Legs

Improving residential real estate data could have a big impact on jobs and the recovery, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. Housing is seen as a potential big driver of the recovery and also employment. I'm here with Bob Johnson. He is the director of economic analysis for Morningstar. We're going to look at some recent housing data and see what it could mean.

Bob, thanks for joining me.

Bob Johnson: It's great to be here today.

Glaser: So, housing obviously was one of the big contributing factors that got us into this recession, and now we're trying to see some signs of life there again. Why is housing so important?

Johnson: Housing is very important because it's relatively employment-intensive, and it drives a lot of other industries. I've talked about before that we lost about 8 million jobs in this recession. Two million were directly related to construction, 2 million out of 8 million job losses. If you start adding in the mortgage brokers, the furniture companies, all the other things that might be related to the housing industry in a tangential way, you are probably talking 4 million of the 8 million. So, the fact that housing had been relatively flat for most of this recovery, had been a real disappointment. Now it looks like it's coming back.

Glaser: So, let's take a look at some of that data then. There has been a lot this week and last. Can you walk us through some of those numbers?

Johnson: Sure. The most important piece I think is from last week, the data from CoreLogic that talks about housing prices. Everybody likes to look at the Case-Shiller data because it is more comprehensive, but it comes with quite a lag and is reported with a three-month moving average.

The CoreLogic data was out and indicated that housing prices were up 3.8% on a year-over-year basis. That now marks like the fourth or fifth month in a row, I believe, where those prices have actually been up on both the month-to-month and a year-over-year basis. And that's important because it gets people out of underwater mortgages, which the number of people underwater is now declining kind of every quarter where we go along.

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