Resources: Newsletter Articles: As Housing Goes, So Goes The Economy

"New housing construction and remodeling activity are driving the nation's economic engine", said Gary Garczynski, president of the National Association of Home Builders (NAHB). "When it comes to adding value to the U.S. economy, nothing matches the might of housing". Look at these facts:

• While other sectors were struggling and even collapsing into recession in 2001, housing has remained one of the few bright spots in the economy, at first cushioning the effects of recession and now boosting economic recovery.
   
• Sales of newly built homes hit an all-time record of 906,000 units in 2001 Ð due in part to exceptionally strong activity at the end of the year.
   
• Meanwhile, the latest government figures indicate that single-family home production hits its strongest pace in more than 20 years this February.
   

Housing production and housing-related services account for about 14 percent of the nation's Gross Domestic Product and drive other closely related sectors of the economy. Home sales and apartment rentals lead to spending on housing-related goods and services, increasing sales for businesses and product demands for manufacturers.

In the first 12 months after purchasing a newly built home, owners spend an average of $8,900 to furnish, decorate and improve that home Ð more than twice the average spent by non-movers. Buyers of existing homes spend $3,766 more than non-moving home owners during the 12 months after purchasing their homes, and renters also spend significant amounts on furnishing their new apartments.

Homeownership is one of the soundest investments that individuals and families can make. The market value of homes owned by U.S. households now stands at nearly $12 trillion, and has risen $2 trillion over the last three years Ð exactly as much as the public has lost in the last two years in the stock market. The market value of corporate equities and mutual funds has dropped by about one-third since the stock market peak of early 2000. By contrast, home prices Ð which have increased at an average rate of about 5 percent annually over the last 20 years. Housing is the most important single asset on the household balance sheet. It accounted for nearly 30 percent of total household assets at the end of 2001, and this proportion obviously was much higher for the 73 million households who owned their own homes. Furthermore, the housing share of assets has risen substantially over the past two years as market values of corporate equities and mutual funds have fallen dramatically.

Source: National Association of Home Builders

sherrybenninger@grubbco.com

The GRUBB Co., 1960 Mountain Blvd., Oakland, CA 94611

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