America's housing boom has fuelled growth in construction, mortgage and real estate jobs, but a rise in mortgage rates could trigger a slowdown that could stop hiring and lead to layoffs, analysts said on Wednesday.
Just as the rest of the economy is hitting its stride, the home buying and building surge that helped ignite the US recovery is poised to slow from a record-setting 2003 pace if mortgage rates rise.
Permits for future building hit a 31-year high in May and housing starts continue to be strong, but David Rosenberg, chief North American economist at Merrill Lynch, said: "The (home) sales side is slipping, so that's telling me that the growth in real estate agents is probably going to moderate."
"Mortgage application activity has slowed substantially over the ... last couple of months, so it means that employment in the financial sector related to housing is probably going to slow too," he said.
Rosenberg points out that housing-related fields have accounted for 212,000 - or one in five - private-sector jobs created in the last three months alone, though the sector only makes up 5 percent of the economy.
David Seiders, chief economist at the National Association of Home Builders, said the housing sector was long the lone strength in America's slow recovery from the 2001 recession - gaining jobs while millions were lost elsewhere. Now that recovery has spread, housing is ready for a breather.
"We sort of feel like we've done our thing, we're passing batons all over the place, and the economy doesn't need housing to be a growth engine anymore," Seiders said.
Interest rates also did their part for the sector, with rates on the popular 30-year fixed rate mortgage sinking to about 5.2 percent last year. But rates have since climbed to 6.3 percent, and analysts see them rising another percentage point by the end of 2005.
Higher borrowing costs have already dampened new home sales, which dropped 11.8 percent in April - their largest one-month decline in more than 10 years.
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