How Housing is helping to Rebuild the Economy

Housing drives the economy in three ways:

Demand for Housing Will Drive Employment

Increased demand for housing will help stimulate new single-family and multifamily construction and boost home sales. We expect starts to hover just below one million over the second half of the year. This also helps other industries such as appliances, services, and furnishings.


Rising Prices = Increased Family Wealth = Increased Spending  

With housing being the biggest asset of most American households, rising house prices directly affect the balance sheet of homeowners. Home equity is the largest component of net wealth for many families. As wealth rises, households generally increase their consumption spending. They may even tap into their equity through a home-equity loan, using the proceeds for either consumption or investment spending. Some evidence that home equity lending has picked up was found in Freddie Mac’s Refinance Report for the second quarter, which saw $9.5 billion in home-equity cashed-out as part of a refinance, up from a year ago.   

Small Business Development is Funded through Home Equity 

Rising house prices will help the economic recovery by spurring small business formation, as a business owner’s home often serves as collateral for a start-up. 


As you can see from the graph, Massachusetts comes in fourth in the country for strong economic growth directly related to home sales. 
 



*Housing’s contribution to the economy, while muted in recent years, remains strong. What’s more, housing’s role in the economy will only expand as modest price growth and stronger sales volume boost agent incomes, new construction puts more workers back to work with expanding incomes, and stronger sales and rising prices result in robust follow-on spending.