Can Real Estate Solve Americas Economic Problems?

By Sara Goldman from PowerRealEstateMarketing.com

Centuries ago, this would have been unlikely. Times have changed, however.

America’s biggest problem at present, according to Daily Finance. is unemployment. The unemployed sector accounts for 7.6% of the American working populace. Include part-timers, commission-based positions and other non-regular work into the equation and the unemployed sector grows by 6.2%. All in all, you get 13.8% unemployment. This is an alarming number.

Is there any cure? If so, how?

There are answers, yes, but there is no one-size-fits-all answer. For the past five years, everyone wracked their brains but with little progress. The problem of unemployment requires fiscal stimulus, says the economists on the left. Right-wing groups, on the other hand, clamor for the removal of regulations, policies and other forms of structures. The road to recovery has been impeded because of such issues.

The economists on the left may hold more water, still there is always a better way. Neither rocket science nor mere hypothesis, it is believed that the housing sector has enough power to address problems of unemployment and similar social issues plaguing American society.

What happened in America is kind of ironic. A report by Heather Boushey posted at Americanprogressaction.org provides a striking analysis. According to her, “an overgrown financial sector, bloated on the real estate bubble it helped create” was what threw the U.S. economy into crisis. Herein lies the oxymoron: the housing sector grew and burst like a bubble. Rather than upstream progress, the economy regressed. This only means one thing: there are deeper structural problems at hand and the problem is not in real estate per se.

So structural problems aside, the housing sector is a potent cure to employment ills of America.

Real estate generates more jobs than many other sectors. For every home built in the United States, approximately 2.1 to 3.05 jobs are created. That is a lot. The figures speak for themselves and sector investors and analysts must take them into account. Homebuilding is the future.

Studies show that the five biggest players in the homebuilding sphere sold a total of 73,028 homes for the past 12 months a figure to be reckoned with. Just imagine the number of jobs created with these much houses.

Sales record for the largest homebuilder, D.R. Horton, registered a whopping 24,493 homes sold. The homebuilding giant got its break during a massive increase last quarter as sales shot up by 34%. PulteGroup garnered second place when it sold 17,221 homes around the same time. Lennar took third place with 14,506 recorded home sales; NVR at fourth place, having sold 10,191 units; lastly, KB Home rounded up the top five with 6,617 units sold.

The average selling price could very well explain why there is variation. The cheaper the price, the more units sold. Such is the case of D.R. Horton, which sold more homes than the rest because it sells the cheapest units among the bunch. Last quarter, the top seller’s average selling price is at $253,400, much cheaper than competitor average prices, which sold for more than $270,000 for each. NVR, the top four seller, has the highest average price pegged at $330,400.

Geography is another factor to consider when you talk about selling homes. The number of houses sold has something to do with where they are located. The West Coast is KB Home’s biggest source of revenue, whereas NVR sold more homes at the Mid-Atlantic areas. D.R. Horton banks on the South, Pulte from the Northeast and Southwest, and Lennar generates revenue from the East Coast.

If you add these five companies in your watchlist, you will gain insight on their activities and how they make their way in an era replete with various economic challenges.

It cannot be ignored that housing has important impact on the economy. In fact, as the Bipartisan Policy Center would have argued, “the construction of new housing is an integral component of the economy.” It may not be the ultimate solution but with properly functioning structures in place, housing can greatly boost an ailing economy.

Current economic growth rates could double if the housing sector reflected its historical average. The United States will need 16.4 million new housing units in a decade or 1.64 million units annually (as per 2010 data courtesy of RCLCO and Bureau of Economic Analysis), according to the projections of The Joint Center for Housing Studies at Harvard University. Should projected demands be met such as high enough growth of housing starts, then 4.4 million jobs will likely be generated by the housing industry alone.

Could housing be the missing link to solving America’s fiscal and employment woes? Most likely. Imagine, GDP share of the housing industry is at 2.2 percent or just about $350 billion. If the missing housing contribution could materialize, then it could represent a doubling of present economic yields. Let us hope the structures in place would function as they should.

Sara Goldman is the director of description and creative writing for <a href="http://PowerRealEstateMarketing.com">Power Real Estate Marketing</a>, a San Diego based marketing company committed to offering Realtors and Mortgage Brokers marketing solutions that help build their businesses and simplify their lives.  Power Real Estate Marketing offerings include: real estate postcards, door hangers, notepads, and magnets to name a few. Our motto is: Better Designs, Better Prices, Better Marketing.

Please visit <a href="http:// PowerRealEstateMarketing.com/blogs/sara-goldman.aspx">Sara Goldman’s Home Page</a> to learn more about her.
 

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