Why Does the Recovery Depend Upon the Housing Market?
If you listen to economists discussing the economy, we seem to come back to the housing market. Financial news programs highlight figures of housing starts, foreclosures, and sales, so why is this important.
Forgive this home inspector for stepping into the realm of economics; however, I was asked why are there frequent mentions about the housing market in relation to the recovery. Is it because the housing bubble began the crisis? That may be one reason certainly. I think that there are other factors which become obvious when we take the time to look at how housing effects our economy.
Of course, many people work in the industry, and we have experienced job losses. You have builders, real estate agent firms, appraisers, inspectors, surveyors, and others. Then we have the related industry which services the loans, insurance, and so on. With a home purchase being such a large part of our financial lives, you will find an increasing number of industries involved in the process. Having everyone in the industry working does increase the pool of consumers, so that could become a minor argument towards improving the economy. Minor? When you take a closer look at these industries, you will find that people leaving this line of work may not be bad. For example, I came across a statistic that only 50% of Realtors are involved in home sales in a given year. Many Realtors, home inspectors, and others do this work as a second job, which they may not provide extra income.
Consumerism Begins at Home
The real benefit of the housing market in the economy comes in the form of consumption. Newly built homes require new appliances. Companies producing dishwashers, microwaves, and air conditioning need new homes to be built for their own bottom line. Newly built homes are not the only generator of new equipment sales. Wear and tare on older items are tolerated by existing homeowners, but when sold, the new owners often replace equipment. This means that the sale of older homes holds an importance to manufacturers. Whether newly built or an older home, we begin our lives in those homes by remodeling, buying new furniture, and adding new smaller appliances. Look around and you will find many websites dedicated to these aspects of the home. (I have been blog surfing many of them latley).
Once we move beyond these material items, we find that service providers come into play. Lawn care, pool care, and pest control are a few businesses which you may hire. Taking a moment, you may hire an interior designer, a landscape design firm, or an energy rater. The web of industries spreading from the fact of homeownership grows. Service continues with utility, telephone, internet, cable/dish providers. With the recession, the home entertainment industry is growing. Sure this is not reliant upon homes; we do have apartments, but I think that homeowners do spend more on these services.
The Economic Way Forward
Go over your own budget. How many items are tied in with the owning of a home. You really have to go back to when you purchased your home. You may recall how much you were spending to make your house a home. Well, I have my wife who always wants to redo our home, so she is doing her part for the economy. Maybe even hug your local real estate investor today? They are probably doing their part parts in this consumer web. There are signs that the housing market is stabilizing. I hope this is true. Bank of America’s announcement of forgiving part of the mortgage payment is an indicator that one lender is recognizing that they need to take further steps to ensure smart growth. (I am glad that I have been buying their stock, and as a shareholder can I say well done).Prices have apparently bottomed out. We will see.
Maybe we should be looking at consumer confidence and the jobless rate. Until we feel confident, and people are secure in their work, we will not see the housing numbers improve. Too many strings begin to spin from this web, but we will get there.
« « Mortgage Fraud Hurts Us All and the TALCB is on the Case| Do It Yourself Home Inspection » »
