The significance of the Real Estate on U.S. GDP: Ken Research


Introduction: The 2008 financial crisis was one of the worst events in the history of the United States and the globe. The crisis was offset by the actions of a handful of individuals in large financial institutions that inflated and nearly destroyed the housing market of the United States. The beginning of the crisis was the introduction of two specific tools – the Collateralized Debt Obligation (CDO) and the Credit Default Swap (CDS). The usage of these two instruments led to the crisis in the United States and then on, the rest of the world and led to collapse of major insurer AIG, lending houses Fannie may and Freddie Mac, the downfall of Merrill Lynch and more. While this issue brings to light the situation of careless management of the U.S housing market, a bigger factor brought into light is the impact of a single market in the U.S and its contribution towards building and sustaining the economy, the housing market.

Overview: In the United States, residential real estate contributes roughly 15-18% of the GDP. 3-5% is accounted for through home construction which generates an average of 2.37 jobs per project creating around USD 89,000 on average in new taxes as per government statistics from Real Estate Industry Analysis. The majority of the contribution is through utilities and rent which comprise of the housing based services creating a major contribution in the real estate sector and building the GDP. This signals a favorable situation for the United States housing market as it has a major capacity to generate new taxes and increase employment.  In 2017, real estate construction contributed USD 1.07 trillion to the nation’s economic output. That’s 6 percent of U.S. GDP. It’s less than the 2006 peak of USD 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. While residential real estate construction and services play a major contributor towards building the economy, commercial real estate has a significant part in economic growth as well. Commercial real estate development supported 6.25 million American jobs in 2016 (a measure of both new and existing jobs).Commercial real estate development contributed USD 864 billion to U.S. GDP. Commercial real estate development generated USD 264.4 billion in salaries and wages. There were 410.1 million square feet of commercial real estate space built in 2016, with capacity to house 1.1 million new workers. Real estate is one of the key sectors in any country and is usually a major contributor towards building the economy. The changes in housing prices make a major difference in determining a person’s wealth and real estate is still a favored investment by many individual and institutional investors. The importance of this industry cannot be downplayed

Conclusion: The impact that real estate has towards building the economy is more than just that of construction. Building homes allows for employment, growth in raw material needs owing to an increased demand for construction equipment and materials as well as boost innovation into developmental technology to increase the pace, aesthetics or effective benefits that the buildings can offer. When considering housing, a majority of population believes in investing in housing based real estate and desire home ownership status with over 64% of the U.S population owning a home as of 2018, this figure is expected to increase to over 75% in the next 5 years.  The significance of this being that the impact that housing has on the economy is enough to substantially grow the economy or, if not careful, it is strong enough to crash the economy. Caution needs to be taken towards jobs and investments in real estate but it also shows that there is a major opportunity for growth and development in real estate with more effective utilities being delivered at lower prices or lowering of construction costs which could increase the rate of home development capable of providing home ownership for increasing members of the population

Key Topics Covered in the Report

Real Estate Market Research Reports

Real Estate Industry Analysis

Market Research Reports for Real Estate

Real Estate Industry Research Report

Real Estate Market Research Reports Consulting

Real Estate Business Review

Real Estate Industry Research and Market Reports

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Ken Research

Ankur Gupta, Head Marketing & Communications