Homebuilding and real estate sit at the top of the food chain when it comes to fueling economic growth. Home ownership has been the absolute foundation for wealth building for centuries and the process of constructing homes fuels many sectors of the economy. Once built, those homes continue to support and grow economic activity both locally and nationally.
Consider these statistics about homebuilding and homeownership in the U.S. :
- A Federal Reserve study found that the median net worth of homeowners reached $195,400 in 2013 compared to $5,400 for renters.
- The National Association of Realtors (NAR) found that for every two homes sold (including new and resale), one job is created. Findings from a study executed by the National Association of Home Builders (NAHB) echoed those findings, which found that 3.94 jobs were created for every 100 single-family home built.
How Real Estate Supports the Economy
Activity in the field of real estate has a trickle-down effect that permeates nearly every other economic sector. The process of building a home is labor-intensive from the start. It starts with planning and zoning at the local level. Builders represent themselves or hire lawyers, both of whom make good salaries. Once approved, the builder uses local contractors to develop the land and build the homes.
The jobs in the building trades pay fairly well, and the employees and their families have room in their budgets for discretionary spending that creates even more jobs at the local retail level. The workers also need plenty of services from the local area, and homes for themselves. New homes need lots of materials and appliances, and all that purchasing creates another trickle down-flow through the local and national economy.
The National Association of Homebuilders reported that in 2015, 394 jobs were created for every 100 single-family homes built. Building these homes generated $28.7 million dollars in the private sector and $3.6 million in revenues for local governments. Once built, those families who occupy them continue to contribute to the well-being of the local economy by generating 69 jobs and $5.1 million in private and local revenues every year.
Apartments also have a direct impact on local economies, but not to the extent that for-sale properties do, especially after they’re constructed. Individual home owners are far more likely to make discretionary improvements compared to apartment owners who are interested in short-term profitability rather than long-term investment value or comfort.
The Role of Supply and Demand
The laws of supply and demand exert a heavy influence in the residential real estate market. When the economy is booming and jobs are being created, real estate values go up. Even when job growth slows, real estate values typically continue to climb in markets where insufficient land availability or the lack of new home inventory increases the demand for homes.
Appreciation Rate Trends in Charleston
Based on data collected by the NAR, the median price of homes sold in the Charleston area from 2012 to 2016 rose by $50,000 to $240,000 in 2016. Over the four year period, this increase leveled out to $12,500 annually. The U.S. Housing and Urban Development (HUD) reported that the average home price increased four percent from 2016 to 2017.
Homeownership forms the foundation for economic well-being and wealth-building in the U.S. Homeowners benefit directly by building equity by owning their own homes, as do all the others who gain from its presence long after the home’s been built.
Home ownership is a vital metric when it comes to the American economy.
If you’re considering buying or selling in Charleston, let’s talk about what’s available today!