The American Economy and its Reliance on the Housing Recovery

by 07 Aug 2012

(TheNicheReport) -- The full recovery of the American economy from its recessionary mode that started in 2008 is contingent upon a solid recovery of the housing sector. Recent reports on new construction projects, pricing, purchase transactions, real estate inventories, and falling foreclosures look promising despite paling in comparison to the days before the bursting of the housing bubble. These are the proverbial green shoots of the economy, and it bods well for the United States as long as the momentum can be maintained.

Current housing market statistics do not indicate a recovery; they rather show that the true bottom of the American real estate downturn may finally be here. The number of new construction projects and building permit applications is very encouraging because it would likely boost many regional job markets. In the United States, the construction industry alone at one point was responsible for employing one quarter of all workers in the country.

Construction Hiring Activity

While the construction industry is still one of the most deeply affected by unemployment, the July job reports indicate that more than 5,500 workers were hired by home builders, developers and contracting firms. This figure is similar to 2005,a year that will go down in history as one of the busiest for residential construction in the United States. It is important to note that residential construction employs a wide range of occupations, from laborers to skilled craftsmen and from professionals to administrative support personnel.

Some economists think that once the pace of construction picks up, the rate of jobs gained could total tens of thousands per month. In the beginning, the construction industry may even experience shortages in some projects due to workers relocating to new regions. Healthy employment levels invariably lead to increased consumer spending, which in the end is the basis of most Western economies.

The Bottom Line of Economic Growth

If consumer spending has been lackluster in 2012, it is mostly due to unemployment, which in turn was caused by the bursting of the housing bubble and the subsequent collapse of the credit markets. A reinvigorated housing market would open the floodgates of consumer spending, and for many Americans who have foregone credit in favor of savings this will allow them to enjoy the fruits of their prudent financial decisions.

A solid housing market is the missing piece of the puzzle on the road to economic recovery in the United States. There is a chance that the green shoots may still be too premature, but Americans are hopeful that they will continue to grow.



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