What Is Housing Real Economic Contribution to the U. S. Economy?

by Tim Herriage

What Is Housing Real Economic Contribution to the U. S. Economy?

by Tim Herriage

by Tim Herriage

Simple answer is that it currently stands at 18% of the annual GDP but it changes based on favorable conditions that creates demand.  The opposite is also true.
housing-contribution-to-2016-gnpThis contribution can be expected to grow provided more new home stock can be built, credit is available for these new home purchases, and assuming higher wages grow in number and amount to make buying a home affordable for homebuyers.
THE DATA
This data from Deutsche Bank and available on Daily Shot tracks the annualized contribution the housing-related share makes to the annual national gross domestic product. It is a reliable and acknowledged economic fact that is clearly illustrated in this diagram, that housing (typically new home construction) makes a major contribution to the economy, particularly following a recession. (Recessions are shown by the vertical grey shaded stripes.) Read into this what you wish in terms of the slowest recovery from an economic recession America has experienced in the last fifty-five years. This slow recovery correlate with the slowest recovery of the housing market and its contribution to the larger economy.  
WHAT DOES THIS MEAN TO INVESTORS?
Expect this fact to change but not have that dramatic an impact on housing other than creating jobs, higher incomes and more demand.  America is so far behind meeting housing demand that three things have happened, especially when we talk of new housing: as of September 2016 new households formed is running at 1.28 million a year, homeownership has dropped to 62.9% while U. S. Census Bureau data set the 2016 new homes built rate at 1,055,000.  Add the fact that single family renters and homeowners are typically not candidates for apartment living.   
Overall newly built homes fall short of meeting current demand, assuming everyone of the newly formed households bought homes, and this ignores existing pent up demand and the fact that about 300,000 homes a year are taken out of service. This million plus new homes are not delivered in balance with the demand, based on geography, economy or price points.
The lead times from identifying demand, raising financing, buying land, completing entitlement, building the homes with available crafts and labor, all adds time to the delivery cycle. Supply is never quite where it is needed. This disorderly behavior opens up opportunities for the curious and inquisitive investor.
This is where alliance with aggressive real estate acquisition companies and real estate sales teams can help a wise investor find and leverage this opportunity whether you are an individual or institutional investor. 2020 REI Companies and Investable Realty can be of assistance in leading markets.  Contact Eric Luneborg – eric@investablerealty.com – 214-335-1889
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