Unemployment Trends and The Effects on The Housing Market

Since the dawn of human civilization, we have wrestled with the implications of unemployment on the individual and society. The strain of this social issue gained particular traction last year following the pandemic and its accompanying ripple effect across different sectors in nations all over the globe.

Today, even as the year 2021 draws to a close, the world is still reeling from the effects of COVID-19. In a world built to accommodate as many people as it can, several months of mandatory lockdowns and social distancing spanning have taken a toll on the job market and consequently other industries.

This article will look closely at unemployment trends and their effects on the housing market.

If you’re searching for answers to the question of how COVID has affected the rental market and more, then stick around to find out.

What’s the state of unemployment today?

While unemployment is something society has always grappled with, its numbers reached record-breaking levels in April 2020. This phenomenon is tied closely to the strict lockdown rules set in early 2020 to check the spread of the Coronavirus. Unfortunately, many of the regulations affected jobs across industries, particularly in the travel sector, and unemployment rates ran up to a staggering 14.8%.

More than a year later, the world has had time to acclimatize, and unemployment rates dropped significantly to 5.2% in August 2021. However, that figure is still more than that of the pre-covid era, with February 2020 standing at 3.5%.

Effects on the Housing Market

As highlighted earlier, the unemployment rates between the pre and post-covid eras are more than quadruple. This sharp increase in the number of adults out of work has profound implications for every sector of humanity.

Let’s take a closer look at how it affects tenants and renters, particularly in the housing market.

#1 Lower housing prices

One of the effects the upward trend of unemployment has on the housing market is that it reduces the cost of owning a home. When unemployment rises, the purchasing power of the average individual drops, and the economy takes a hit.

Consequently, property owners and money lenders reduce their prices, making the cost of debt cheaper. So those who can still afford to buy can purchase a home at a lower price, hauling the real estate industry into a buyers’ market.

Another reason housing prices are dropping is the migration of tenants from large cities to surrounding counties. Now that remote work is gaining more traction, proximity to the office is less of a concern. More people are moving to other locations where housing is cheaper.

#1 Waiving rent

The sharp increase in unemployment indicates that formerly employed people are now left without a job. Many tenants are now struggling to put food on their table, let alone pay rent. An estimated 32% more households are unable to cover their rent.

Although rental relief programs are available to ease the burden, there’s no denying that landlords still have to bear the brunt of it by waiving their rights to collect rent altogether.

#3 Reevaluating repayments

Many landlords are now adopting a reevaluation system as a way to manage their investment options. Some property owners view their rentals as an active means of survival, so waiving their rights to collect rent is out of the question.

Thus, more landlords are open to reducing or reviewing their tenant’s payment schedules so they can also meet up with their bills.

#4 Increase in the Mortgage Arrears Rate

The backlog of rent means many landlords are unable to meet up with their mortgage payments. Many property owners depend on the rent from their tenants to make their loan repayments, and when the chain is severed by unemployment on one end, it affects the other.

Many banks and other non-conventional lenders are acting in kind by waiving or extending their usual late as a means to be more accommodating.

#5 Tsunami of evictions

To protect tenants and their households from being homeless, the C.D.C issued an eviction moratorium which they extended several times. The most recent one lapsed in July 2020, and after the Supreme Court rejected the government’s proposal to extend the ban, millions of Americans now face eviction.

On the flip side, landlords shouldering the debt of millions of dollars in unpaid rent can now evict non-paying tenants in hopes of attracting renters with more financial power.


Several factors influence the rental industry, including unemployment rates and trends. Consequently, amid higher unemployment rates, housing prices go down, landlords and tenants have to reevaluate repayment options, and evictions become inevitable.

Despite all these, savvy real estate investors can still make a decent return, especially those working with management companies that understand the market. Their knowledge helps them quickly adapt to the changes, allowing them to draw in profits or at least mitigate their clients’ losses.

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