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The Interrelationship of Real Estate and the Economy

There has always been a strong overlap between the different areas of the economy. But after the Great Recession of 2008. Many citizens become more aware of the impacts one industry or area had on another. Consider the impact of the real estate market. It plays a significant role in the development of the United States economy. With the residential market proving the living spaces for American families while commercial properties house the backbone of the business world’s dependence on American goods and services.

A Source of Wealth

For those who choose to invest in real estate. Whether as a homeowner, tenant, agent, investor, or otherwise, owning or dealing in property is considered one of the greatest sources of wealth an American individual can obtain. As a whole, the real estate market is worth millions to the U.S. economy. Not only does it have overlap in areas of residential housing, office space, commercial manufacturing, or other commercial property needs. The construction industry associated with real estate develops significantly contributing to the nation’s gross domestic product.

This number equaled 6.2% of America’s GDP. Back in the recession of 2008, it was the drop in housing construction that become a huge contributor to the nation’s exceptionally high unemployment rate. As real estate construction is a leading factor in job creation. If you want to make your own money off the real estate market. You can do so through becoming a real estate agent or dealing in properties. You would need to research ‘real estate school near me’ for the right direction on how to become a licensed agent. But dealing in properties could be a more natural choice if you work in construction or have a knack for a good deal.

The Economic Connection to Real Estate

There is an interrelationship between job creation or growth and the local real estate market. You may have heard the term that it is either a buyer’s or seller’s market. And this refers to the supply and demand that accompanies growth trends on either side of the relationship. When there is a decline in home sales, it can lead to a decline in the overall prices.

For the most part, there is a shortage of affordably price homes and an unease with economic conditions. The affordability of a home is often directly related to the income and earning of potential homebuyers. Although mortgage rates are at an all-time low and the unemployment rates have also dwindled. There is still an issue with supply that has created a current condition of being a seller’s market. However, the impact of a buyer refusing to buy affects more than the housing industry.

The Effects of Personal Consumption

The U.S. economy depends heavily on personal consumption, and when consumer spending is down, the economy takes a downward turn. This has a ripple effect on income, employment, and real estate. Prior to the Great Recession of 2008, many families and individuals were chasing the dream of homeownership and with much success. However, banks were lending money to buyers that were projected more likely to default. When the predictions came true and the personal consumption habits of millions of Americans got the best of them, the ripple effect created defaults with the lenders and their investment backers. This led to the crash and the federal bailout.

The Effects of Employment

The current state of the real estate market has many believing another crash will take place within the next few years. Despite the fact that unemployment rates are at an all-time low and the economy is showing more financial potential, the housing market has stagnated and interest rates are continuing to fall. However, it seems that many Americans have learned from the past and are limiting their consumption despite having more solid employment and financial footing. Financially, many people are able to avoid bankruptcy and dependent on credit to support their lifestyles. More individuals are staying put while they wait for the housing market to take a turn towards a buyer’s market.
The year 2020 is predicted to start turning the tide of the housing market, as real estate economists project the next few years to bring supply and demand back in balance. As for now, there is simply not enough inventory for all the people who wish to become homeowners. And the real estate market is only hopping for those who are selling.

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