Nationwide, businesses are beginning to reopen, employees are returning to work, and retail and service sales have started to increase. And as the economy begins to strengthen, many wonder if the real estate market will be the driving force behind its recovery.
Will the Housing Market Affect the Economy’s Recovery?
In 2008, the housing market collapse was the main factor behind the collapse of the nationwide economy. At the time, financial recovery didn’t begin until the housing market started to recover. Will our current housing market affect the economy in the same way?
Many economists think the housing market could actually lead us out of recession in 2020. Here’s how.
The housing market has historically pulled the country from recession
One economist at CoreLogic notes that “for the first six decades after WWII, the housing sector led the rest of the economy out of each recession.” Other economists state that the housing market is underbuilt, rather than overbuilt as it was in 2008, and houses are in high demand. Both factors that indicate a strong recovery for the housing market.
The sale of one home drastically affects its community
One single home might not seem like it has much power to affect the community and the economy around it. But this is actually far from the truth. Consider the sheer number of people involved in the sale of a home. Typically, there are two real estate agents. There is a home inspector, an appraiser. A lender, an attorney or firm. There may be an escrow company, a title check. Insurance providers. There are taxes on the sale.
And that’s just from the sale of the home! After a new buyer moves in, they may hire contractors or other vendors, make retail purchases for new furniture or decor, or even undertake their own improvement projects. In fact, the National Association of Realtors estimates that the sale of one average single-family home generates over $43,000 in revenue!
New construction has an even more powerful impact
An average single-family home generates $43,000 in a traditional resale scenario, but if that home is newly built, its revenue more than doubles! Plus, new construction creates jobs—as many as 2,900 new jobs for just 1,000 new homes. Those same 1,000 homes will also generate over $110 million in tax revenue for city and state government.
Consider also that the impact of new homes (or even the purchase of a resale home) extends beyond the local agents, lenders, builders, or architects involved in the construction and sale. Real estate sales generate sales for vendors of lumber, appliances, light fixtures, and windows, as well as the companies that ship and store these products.
Real Estate Might Drive Economic Recovery Once Again
As the economy recovers, the housing market is in a position to play a major role in the speed of its recovery. Should homes remain in high demand, and should sellers continue to list their homes, the housing market should stay strong, and the economy along with it. In short, yes, the housing market will affect the economy.
Thinking of Buying or Selling in the Triangle?
Have you been thinking of buying or selling a home in the Triangle area? Linda Craft & Team are here to help. Contact us today to learn more about how we can put our 350+ years of combined experience to work for you.