Those looking to glimpse the future of the housing market may want to start watching help-wanted ads rather than the real estate section.
Experts who say the housing market is cooling, but won't implode, argue that solid job growth should be enough to prevent a collapse in home prices. But others who see a housing "bubble" ready to pop say a developing slowdown in home building itself could hurt job growth enough to put a big dent in housing.
"The economy was healthy when the stock market plunged in 2000," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington and an outspoken advocate of the housing bubble theory, but stock prices "had gotten out of line with reality."
"We've been building too many homes in a market maintained by speculation. And job growth is not going sustain that."
Recent government figures show that about 1.5 million homes were vacant in the first quarter, most of those presumably up for sale, a 17 percent increase from a year earlier. The 2.1 percent vacancy rate was the highest on record since the government began tracking it in 1994. It was also the fourth straight quarterly increase.
"When you see it increasing quarter after quarter, there seems to be something going on here," Baker said. "We're building more homes than are being filled."
Among those most worried about the real estate market are home builders themselves. The National Association of Home Builders saw its index of builder confidence sink last month to the lowest level since 1995, save for two months right after Sept. 11.
Nearly three out of four builders reported more homes on the market in their areas and about one in five reported a jump in new home orders being cancelled. About three-quarters also reported a drop in purchases by people buying homes as investments.
There's more. Late Monday, Hovnanian Enterprises, a builder with big operations in California and Florida, cut its guidance and St. Joe's, a smaller builder, reported surprisingly weak results Tuesday as the firms struggle with a faster-than-expected drop in the housing market. The stocks of both companies tumbled Tuesday.
But some economists say that while housing will cool as mortgages continue to rise, home sales and prices won't collapse, due mostly to strength in the job market. In fact, sales of both new homes and existing homes picked up in March, even as mortgage rates rose.
"What we had in the past couple of years was an unprecedented frenzy of activity," said Lawrence Yun, senior economist for the National Association of Realtors. "That's what we're seeing: A decline from a frenzied, unsustainable rate."
"Our experience says prices do not go down when there's job creation in the local economy," said Yun. "In local markets where they are flat on jobs, they could see prices decline. But we're projecting 2.3 million new jobs this year. The job market is providing a buffer. It's a counter force to rising rates."
So far job growth is cooperating. The economy created 590,000 new jobs in the first quarter, according to the Labor Department's payroll survey - an annual rate just under 2.4 million. And economists believe that job growth stayed on track in April, with an average forecast for payroll growth of 200,000, according to a survey by Briefing.com. The unemployment rate is seen holding steady at 4.7 percent.
Yun's group is calling for prices of existing homes - which account for about three-quarters of all homes sold - to rise 6.4 percent this year while new home prices gain 2.3 percent - even as sales decline.
While that's far less than the 12 percent and 9 percent gains in median prices last year, it's still solid growth. And the Realtors forecast includes 30-year fixed rate mortgages hitting 7 percent by year-end, up about half a point from current levels.
But the experts who see a possible meltdown say strong employment isn't enough to support an overinflated housing market.
"You have to look at how much more inventory has been put on the market and what impact that could have on pricing," said John Tomlinson, analyst with Majestic Research, an independent research firm. "To get sales going, people are going to have start pulling in their expectations."
Tomlinson sees new home prices flat or edging lower this year with existing home prices flat to slightly higher "at best." He points to reports showing big increases in the number of homes on the market.
Past housing downturns have seen builders slash their work forces by up to 40 percent, said Baker, the housing market bear, and with an estimated 3.5 million people working in residential construction, the loss of more than 1 million jobs would obviously cause problems for the labor market.
Add job losses at mortgage firms, building supply retailers and real estate agencies and the downturn in home building could itself further weaken one of the key supports for real estate.
One of those worried about just that is James McShirley, owner of Sulphur Lumber near Indianapolis. He's already laying off staff and not filling open positions due to a slowdown in orders from his builder clients.
"We're holding off as much as we can because qualified people are hard to find," he said. "But there will come a point where we have to face that (more layoffs) and it could be soon."
McShirley said when he sees his clients cutting staff, and a local mortgage broker with 100 employees go out of business, he grows more worried.
"Those people losing their jobs are the classic home owners. This could be a vicious circle," he said.