Issue Position: Importance of the Real Estate Market

Issue Position

Michael understands the integral role real estate plays in the U.S. economy. Residential real estate provides housing for families. It's often the greatest source of wealth and savings for many families. Commercial real estate, which includes apartment buildings, create jobs and spaces for retail, offices and manufacturing. Real estate business and investment provide a source of revenue for millions.
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In 2017, real estate construction contributed $1.07 trillion to the nation's economic output. That's 6 percent of U.S. gross domestic product. It's less than the 2006 peak of $1.195 trillion. At that time, real estate construction was a hefty 8.9 percent component of GDP. Real estate construction is labor intensive. That's why a drop in housing construction was a big contribution to the recession's high unemployment rate.
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Construction is the only part of real estate that's measured by GDP. Real estate also affects many other areas of economic well-being that aren't measured. For example, a decline in real estate sales eventually leads to a decline in real estate prices. That lowers the value of all homes, whether owners are actively selling or not. It reduces the number of home equity loans available to owners. They will cut back on consumer spending.
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Almost 70 percent of the U.S. economy is based on personal consumption. A reduction in consumer spending contributes to a downward spiral in the economy. It leads to further drops in employment, income and consumer spending. If the Federal Reserve doesn't intervene by reducing interest rates, then the country could fall into a recession. The only good news about lower home prices is that it lessens the chances of inflation.

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