Why the Housing Recovery Matters
Recently news outlets have been reporting small gains across the country in the housing market. Home prices improved in 20 cities, including Atlanta, and reporters were quick to add that an improving housing market will benefit the economy as a whole. No one followed up with an explanation of why a healthy housing market has such an impact on the economy. If you’re not in the market to buy or sell a home, why should you care about the housing market?
Historically, residential housing has accounted for 5 percent of the United States GDP. Currently, it contributes 2.3 percent. When the housing bubble burst, the effects rippled out into the economy as a whole. The construction industry was immediately affected, as were real estate agencies, but a variety of other industries were affected as well – many that most of us don’t think about.
The housing industry has an impact on plumbers and other repairmen, as well as architects, engineers, interior designers, carpenters and landscapers. A decline in the housing industry also affects people’s ability to move for a new job opportunity. Recruiters say it can be difficult to recruit candidates to relocate to a new job if their home has been devalued and is underwater. The return of a robust housing market will positively affect many sectors of the economy.
When housing values decline, tax revenues for communities decline as well. There is less money available to pay for policeman, fireman, schools, city maintenance and other government functions.
According to the National Association of Realtors, home ownership accounts for more than 2 trillion dollars of our economy, or 15 percent of the GDP. Its studies have shown that for every two homes sold, one job is created. Home purchases bring more money into the economy in the form of home improvements, furniture and other home-related items.
We’ve gotten to a place where many consumers view home ownership as a risky investment. If you are considering buying a home, owning a home is still – and will continue to be – a smart financial move. Renting costs more money in the long run. After years of renting, you won’t have an investment to show for it. Diligently making mortgage payments and owning your own home means lower costs after you retire, and you’re able to leave a valuable asset to your heirs. Homes do have value, and as the market improves, so will our confidence in that value.
The return to a strong housing market will help our national psyche. Good news about the housing industry is good news for all of us, whether you’re in the market for a home or not.
– J.D. Crowe, Senior Vice President of Southeast Mortgage