Can We Trust the Housing Market?

June 17, 2013

The housing market is often used as one of the big benchmarks for the health of America's economy. For most economic analysts, the key numbers to watch are housing prices, new-home sales, and sales of previously owned homes. However, there are more metrics to look at with the housing market than simply sales, and those other metrics appear to hint that the housing recovery may not be all that it is cracked up to be.

The hidden numbers lie in the maintenance of currently owned real estate, as opposed to construction of new homes. Roofers, landscapers, cleaning staff, and anyone that does anything to maintain any appliance in the home are all part of the larger housing market. Taking those related industries and all of their derivatives into account, and you'll begin to find that housing, not healthcare is the driving force behind the health of our economy. And in that context, we face a rough road ahead, especially according to Fannie Mae.

The way that the housing market is normally tabulated shows that housing accounts for 5% of the GDP. This nothing to sneeze at, but definitely not a metric that would show that as housing goes, so goes the US economy. However, if you include every derivative of the housing market (those roofers I spoke of earlier) then housing accounts for nearly 22% of our GDP. That's right up there with healthcare.

The current housing 'recovery' isn't being fueled by that large mass of manual labor workers. Instead it is being fueled by investors who are pumping money into new housing projects. Because those menial workers aren't being concentrated on properly, they're still left without their usual homeowner's maintenance work, which is substantially slowing down the overall market recovery. Throw in current and future budget cuts, and the picture starts to look even grimmer for homeowners and home builders alike.

Want to find out more about this course at FurtherEd? Check out Lawconomy: A Global Analysis of Key Laws Affecting the US Economy.


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