Investment propertyBy Any Other Name, New Homes Still Spur the Economy
Call it new residential construction, tract houses, "spec" homes, or
production home building - whatever you call it, it"s the straw that stirs
the soup in these United States. Did you ever pay attention to how many
livelihoods are linked to the homebuilding industry, and how new home starts
are mentioned in each and every economic forecast worth its salt in this
country?
According to the National Association of Home Builders, residential
construction stimulates the economy directly by generating jobs, wages, and
tax revenues both directly and indirectly as the demand for goods and
services created by the construction of new homes has a "ripple" effect
throughout the American economic system.
The construction of 1,000 single-family homes alone generates 2,448 full-time
jobs in construction and construction-related activities, $79.4 million in
wages, and $42.5 million in combined federal, state and local revenues and
fees. It may be difficult to gauge the indirect impact, but think of every
item related to a home, such as appliances, cabinets, furniture, windows,
roofing, lumber, and even furniture, and you can imagine how far-reaching
the effect of the construction of just one new home really is.
The September, NAHB forecast for single family home construction for the year
2000 numbers 1.225 million, and multifamily home construction at .312
million, making a combined 1.536 million new homes produced during the
double-zero year. The forecast for 2001 sees little change, according to
Andrew Kochera of the National Association of Home Builder"s statistical
research department.
Over half (50%-60%) of all new homes built in the United States are built by
production home builders, with 28% or so of the new homes being custom or
spec-built by individual land owners. With 70% of homes sold located on land
that was builder-owned, this accounts for the largest percentage of homes
built in the U.S. These builders" efforts are more densely concentrated in
the Western and Southern states, with the fewest in the Northeastern U.S.,
where land is less available, and smaller tracts or in-fill housing is more
prevalent.
This translates into the relative likelihood that the consumer will, by and
large, buy a tract home or spec-built home sometime in their lives if they do
buy new construction. (Spec-built may mean an individual builder will buy
land, put up several of his own choices of floor plans, and sell them on
speculation, which is not unlike a production home builder on a much smaller
scale).
So here"s the rule of thumb that many economic forecasters like to rely on.
When housing starts are healthy, all is right with the economic world in
general. And when you begin to see consistent dips in these statistics, it"s
time to start being concerned. Just think, though. Although existing homes
may account for over 80% of homes sold in the United States, they had to
start somewhere. It seems likely that the remainder of this statistic can be
the reason for so many smiles at Building Industry Association meetings
across the country these days. And from what I hear, most of us who are
close to the home building industry won"t take it for granted this time.
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