Last year started off with a bang. Unemployment was under 4%, forecasters were giddy with their projections for the economy, and the residential housing market had the strongest January and February activity in over a decade.
Then came the announcement on March 11, 2020, from the World Health Organization declaring COVID-19 a worldwide pandemic. Two days later, the White House declared it a national emergency. Businesses and schools were forced to close, shelter-in-place mandates were enacted, and the economy came to a screeching halt. As a result, unemployment in this country skyrocketed to 14.9%. A year later, the economy is recovering, and the U.S. has regained more than half of the jobs that were originally lost. However, some businesses are still closed, and many schools are still struggling to reopen. Despite the past and current challenges, there is one industry that’s proven to be a tailwind helping to counter all of these headwinds to our economy. That industry is housing. Remarkably, the residential real estate market (including existing homes and new construction) has flourished over the last twelve months. Sales are up, prices are appreciating, and more new homes are being built. The housing market has been a pillar of strength in an otherwise slowly recovering economy. How does the real estate market help the economy?
At the beginning of the pandemic, the National Association of Realtors (NAR) released a report that explained:
“Real estate has been, and remains, the foundation of wealth building for the middle class and a critical link in the flow of goods, services, and income for millions of Americans. Accounting for nearly 18% of the GDP, real estate is clearly a major driver of the U.S. economy.”
The report calculated the total economic impact of real estate-related industries on the economy as well as the expenditures that resulted from a single home sale. At a national level, their research revealed that a single newly constructed home had an economic impact of $88,416.
Here’s how it breaks down: ![Chart: Economic Impact of a Single Newly Constructed Home. Income generated from real estate industries: $24,471; Expenditures related to home purchase: $4,650; Multiplier of housing-related expenditures: $13,978; new home construction: $45,317; Total Impact: $88,416. [Cogent Equities logo]](/uploads/6/2/7/9/62795545/031721-economicimpactofasinglenewlyconstructedhome-chart-01_orig.png)
The map below shows the impact by state:
![Map: Average Economic Impact of One Home Sale by State. U.S. Average: $88,000. [Cogent Equities logo]](/uploads/6/2/7/9/62795545/031721-avgeconomicimpactofonehomesale-map-01_orig.png)
The impact of an existing home sale is approximately $40,000.
Real estate has done more for our economic wellbeing than virtually any other industry over the last year. It’s been a beacon of light during a very challenging time in our nation’s history. Bottom Line
Whether you’re buying a newly constructed home or one that already exists, you’re making a positive economic impact in your local community—and it’s a step toward your homeownership goals as well.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Cogent Real Estate Equities, LLC does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Cogent Real Estate Equities, LLC will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
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