Since a home is usually the largest single purchase an individual or couple will make in their lifetime, it’s no surprise that housing plays a significant role in shaping national economies.
An effective tool for gauging the condition of a nation’s economy based on the dollar value sum of the goods and service produced within a certain time period, Gross Domestic Product (GDP) is measured two ways – by adding up what everyone earned (income approach) or by adding up what everyone spent (expenditure method). Logically, both measures should yield roughly the same results.
According to the National Association of Homebuilders (NAHB), housing contributes to GDP in two basic ways: through private residential investment and consumption spending on housing services. Historically, residential investment has averaged roughly 5 percent of GDP while housing services have averaged between 12-13 percent, for a combined 17-18 percent of GDP.
NAHB research also shows how building 100 average single-family homes generates more than 300 jobs and nearly $9 million in taxes and revenue for state, local and federal governments that supports local schools and communities across the land.
Plus, perhaps more than any other consumer product, housing is “Made in America.” New homes and apartments don’t arrive in this country on container ships from Europe or Asia, and most of the products used in home construction and remodeling are manufactured here in the United States.
Along with the fact that national policy on housing finance and budget issues ultimately impact job creation and future growth, these are all key reasons why our country maintains a long-standing commitment to homeownership, according to the NAHB.
Consider this, based purely on population growth and demographics, the US will need to build 17 million additional homes over the next decade. However, since April 2006, more than 1.3 million residential construction jobs have been lost.
With the gap between current production and potential housing production at about 800,000 homes, that equates to more than 2.4 million untapped American jobs.
Closing this gap, which is the result of many factors including deferred household formations, a lack of construction financing and flawed appraisal practices under which new homes get compared to distressed and foreclosed properties, thereby distorting true market values, is the challenge policymakers now face.
A survey of voters conducted on behalf of the NAHB last year by Public Opinion Strategies and Lake Research Partners found that despite the ups and downs of the housing market, home owners and non-owners alike consider owning a home essential to the American Dream and support politicians who embrace pro-housing policies and the mortgage interest deduction.
An overwhelming 74 percent of the respondents said that owning a home is worth the risk of the fluctuations in the market and 68 percent of those who do not own a home say it is a goal of theirs to eventually buy one.
These results are consistent with a New York Times/CBS News survey that reveals more than nine out of 10 Americans oppose eliminating the mortgage interest deduction; a recent Harris Interactive survey that shows more than four out of five renters desire to be home owners; and a poll released last May by the Woodrow Wilson International Center for Scholars, which found that voters also placed a very high importance on homeownership.