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Real Estate and the Economy

Carly Sutherland

Carly Sutherland

As we just finished the third quarter of 2017, it’s time to take a brief look at the U.S. current economy and whether now is the time to invest in a home.

Real estate plays a fundamental role in the status of the U.S. economy. It not only creates jobs, but it’s often the most considerable source of wealth and savings for many American families. Real estate business and investment alike implement a source of revenue for millions.

The Bureau of Economic Analysis (BEA), U.S. Department of Commerce, essentially encourages a better understanding of the United States economy. BEA uses and provides relevant, accurate and up-to-date economic account data which is quite useful and necessary in determining the status of our current economy. BEA provides a quantitative view of national, regional, industry and international accounts. Based on the economic accounts statistics that BEA provides, government, business decision-makers, researchers, and the American public are all allowed to understand and follow the current performance of the U.S. economy. To ensure accurate data, BEA collects source data, conduct research and analysis, develop and implement quantitative methodologies, and distribute the gathered statistics to the government and public alike. According to the BEA, these accounts which they provide furnish essential data and information on such key issues as economic growth, regional economic development, inter-industry relationships, as well as the overall position of the U.S. population in regards to the current economy. In 2016, for example, real estate construction contributed $1.2 trillion to the U.S. economic output, which secured 6% of U.S. Gross Domestic Product (GDP), which is calculated by the BEA analysis. This well exceeded its peak in 2006 of almost $1.2 trillion.

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Although construction is the single part of real estate that’s measured by GDP, real estate also has an effect on other operations of economic prosperity that aren’t measured. These effects can accordingly be beneficial, or not. For example, a decline in real estate sales eventually leads to a decline in real estate prices which lowers the value of houses, whether owners are actively planning to sell or not, which can in turn reduce the number of home equity loans available to owners. And so on. 

Here is a list of data points from BEA’s GDP in regards to real estate investment which may suggest an encouraging time for you to invest. BEA’s full GDP can be found here.

 - Real Gross Domestic Product (GDP) increased at an annual rate of 1.2% in the first quarter of 2017.

- Real Gross Domestic Income (GDI) increased 0.9% in the first quarter in contrast to a decrease of 1.4% in the fourth quarter of 2016.

 - The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.0%  percent in the first quarter, compared with an increase of 0.3% in the fourth quarter of 2016.

 - Current-dollar GDP increased 3.4%, or $158.2 billion, in the first quarter to a level of $19,027.6 billion.

 - The price index for gross domestic purchase increased 2.6% in the first quarter, compared with an increase of 2.0% in the fourth quarter of 2016.

The GDP goes on to state, “The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed investment, exports, residential fixed investment, and PCE that were partly offset by negative contributions from private inventory investment, federal government spending, and state and local government spending.”

If you and your family find that now is your time to build your dream home, or if you’re interested in speaking with us about building a home in your future, please contact us here at Truland Homes- we look forward to hearing from you!