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What Real Estate contributes?
Real estate plays an integral role in the U.S. economy. Residential real estate provides housing for families. It's the greatest source of wealth and savings for many Americans. Commercial real estate, which includes apartment buildings, creates jobs and spaces for retail, offices, and manufacturing.
The ripple Effect -
Construction is the only part of real estate that's measured by GDP. But real estate affects many other areas of economic well-being that aren't measured. For example, a decline in real estate sales eventually leads to a decline in real estate prices. That lowers the value of all homes, whether owners are actively selling or not. It reduces the number of home equity loans available to owners. This ultimately reduces consumer spending as more homeowner cash is tied up in home projects.
A reduction in consumer spending contributes to a downward spiral in the economy. It leads to further drops in employment, income, and consumer spending. If the Federal Reserve doesn't intervene by reducing interest rates, then the country could fall into a recession. The only good news about lower home prices is that it lessens the chances of inflation.
According to the Bureau of Labor Statistics, job openings are up to a high of 10.9 million on the last business day of July, an increase of 749,000. This many missing workers doesn’t just mean a few inconveniences, it spells a huge amount of trouble in a whole lot of industries. The labour shortage is serious.
Although there are a few sectors that have been extremely disrupted by the pandemic labour shortage, the problem is really systemic and it touches everything, especially the real estate market.
There are a number of factors at play here, mostly related to labour, the most pressing being that there are not enough materials to start projects, caused by both manufacturing shortages and supply-chain issues, which go back to a lack of human capital to create, unload, transport, sort, store, reroute, and sell everything from lumber to paint and shingles.
According to Realtor.com, 6.1 month's worth of new homes are listed for sale, but more than 90% of those are either under construction or haven’t even broken ground yet
The bottom line -
The bottom line -
Although the hiring crisis has touched every industry and made huge headlines in hospitality and restaurants, the fact is that there has been an ongoing labor shortage in construction for years and years, which has enabled the massive housing shortages we’re seeing today.
Now that we’re also short on building supplies, which is also in part due to pandemic-related labour shortages and COVID-19 related slowdowns for safety reasons at manufacturing facilities, we’re just digging a deeper hole in much-needed inventories.
What I do know, though, is that we’re facing a serious crisis in affordable housing, and that’s going to feed directly back into the hiring crisis. Where people can’t afford to buy or rent for what they earn, they don’t stay. It’s a very simple concept. businesses there are going to need to find more ways to automate entry-level jobs because no one will be able to afford to stick around to do them. It is a huge problem for everyone. This shows the importance of real estate in the economy.
Source -
https://www.thebalance.com/how-does-real-estate-affect-the-u-s-economy-3306018
https://www.cnbc.com/select/how-much-will-a-home-in-the-us-cost-by-2030/
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