As unemployment continues to drop (initial jobless claims are down 44% from mid-2009!), that’s good news for housing, as Dan Green points out. It’s more than just “people with jobs are obviously more likely to buy a home.”

There’s a psychological connection between employment and housing, too.

It’s not just out-of-work Americans that don’t look for new homes — it’s fearful Americans as well. When people have concerns about losing a job, or taking a pay cut, they’re are just as unlikely to move as people without a job at all.

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See, when the job market recovers, it lessens those fears and draws out new buyers — even those with an “underwater” home in need of a short sale. A rising jobs market takes home values right with it.

Click here to read it all over at The Mortgage Reports.