Housing-related job cuts already ahead of 2006 total

NEW YORK CITY, N.Y.
July 26, 2007 11:28am

A new report released Thursday says housing-related job cuts have soared to record levels in 2007.

Through the first six months of 2007, planned job cuts announced by firms in the real estate, construction and mortgage lending industries reached 37,564 -- 65 percent more than the 22,814 job cuts announced in all of 2006, according to the report from outplacement company Challenger, Gray & Christmas Inc.

Housing-related job cuts account for 10 percent of the 393,499 job cuts announced so far this year. In 2006, housing cuts represented less than 3 percent of the year-end total.

“The impact of the housing market slump is probably even greater than these numbers indicate. We are seeing job cuts in several other industries, including retail, consumer products manufacturing and industrial products manufacturing resulting from the slumping market,” says John Challenger, chief executive officer of Challenger, Gray & Christmas.

On Thursday, Wells Fargo said it was shuttering its nonprime wholesale lending business, affecting more than 130 jobs, although the company hoped to retain some of the workers in other units.

According to the Challenger report, the majority of housing job cuts came from firms in the construction industry, which announced 19,030 or 51 percent of the 37,564 housing job cuts this year. Mortgage lenders announced 16,638 job cuts in the first half of the year, more than double the 8,210 cuts announced by these firms in the first half of 2006.

The Challenger report comes on the heels of two dismal reports showing that both existing and new home sales continued their decline in June. On Wednesday, the National Association of Realtors announced that existing home sales fell to a four-and-a-half-year low.

On Thursday, the Commerce Department reported that new home sales declined by 6.6 percent in June. Sales of new homes for the year are now 22.3 percent below 2006 levels.

“Recent upticks in home sales and prices deceived many people into thinking that the housing market had already reached the bottom and was ready to rebound. However, unlike the dot.com bubble, which collapsed rapidly after the bubble burst, the deflation of the housing bubble could take several years to play out. During that time, we may see periods where the market levels off or improves, but any positive reports should be viewed with caution,” says Mr. Challenger.