By Boyce Thompson. In an issue dedicated to analyzing the trends of the last year, can there be any doubt about the biggest event of the year? It has to be the heroic effort of the housing industry, literally carrying a moribund economy on its back through much of the year. Without the housing industry supplying jobs and creating value for buyers, 2002 might have gone down as a very, very bleak year.
What a welcome role reversal for an industry with a long history of leading the economy into darkness. When the books are closed on 2002, the industry is likely to have set a record for new-home sales. Housing starts will probably finish at one of the highest rates of the last 15 years, at 1.7 million, up 5 percent over last year. Not bad for industry that went into the year on trembling ground due to the fallout following Sept. 11.
It's pretty amazing when you start to think about the economic impact that each housing start has on the local and national economy. In 2002, new residential construction contributed more than 4 percent, or $386 million in inflation-adjusted dollars, to the gross domestic product (GDP), representing 1/25 of the economy, according to NAHB economists.
Where do these numbers come from? You. Each time you start a home, it creates demand for 2,841 square foot of roofing, nearly 14,000 board feet of lumber, and three bathroom sinks, to name a few of the many, many components that go into a house. Not only does a home produce factory jobs to make those components, and jobs to produce the raw materials that go into the products, it creates service jobs to specify and deliver the goods.
The jobs and tax revenue really start to add up when you look at the impact of 1,000 homes. At that level of single-family home building, the NAHB estimates that roughly 2,448 jobs are created in construction and related industries. That generates nearly $80 million in wages and more than $42 million in taxes and fees.
Housing keeps producing jobs and revenue even after people move in. Buyers spend more money to improve their home. They buy a new mattress, curtains, and furniture. Retail businesses crop up to serve them, generating more jobs and tax revenue. And on and on it goes.
This year, housing's impact on the economy was even greater than usual. While the economy grew 2.4 percent, the value of residential fixed investment rose faster, making housing responsible for nearly 6 percent of GDP growth in 2002, according to NAHB economists.
When you consider all the wealth that housing creates for buyers--a topic addressed in previous columns--the industry's contribution to society is even more profound. Home equity accounts for nearly half of the typical household's net worth. And that part of the portfolio has been doing better than any other investment in the last several years.
As the year draws to a close, it's important for business people to review their accomplishments. But don't overlook the industry's larger accomplishments. Housing proved to be the big engine that could in 2002. That's something to be very proud of.
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