Randy’s Blog | Talking Recovery Numbers
Posted by Randy Sebastian on Aug 21, 2013
As the final weeks of summer are winding down, kids are headed back to school soon and our local economy is picking up some steam. I read in the Oregonian today that Portland had its 8th straight month of creating more jobs, unemployment is heading down and interest rates are remaining at historic lows. All good news for our friends, family and our larger economy.
But let’s talk about my favorite topic – real estate. Earlier in the year the market was experiencing inventory shortages. I think we’re working our way through that issue now. The months’ supply of available housing inventory, as reported by the National Association of Realtors, has increased from 4.3 months this past January to the current number of 5.2 months. And it seems inventory will continue to increase as we move forward.
Appreciation in Portland has seen strong year over year gains. Zillow recently reported a 6% overall national gain in appreciation, while The Oregonian reported a 12% year over year gain for Portland. The Portland Business Journal also reported Oregon home prices are still 17.9% below their pre-recession averages. The bottom line for me, the economy is improving, people are getting back to work and real estate values are headed in the positive direction again.
Housing has always led the economy out of a recession. Housing helps strengthen the economy in several ways. A recent Freddie Mac report, August 2013 U.S. Economic & Housing Market Outlook, explained the three reasons why housing is the key driving force to the overall economic recovery:
1. Demand for Housing Will Drive Employment
Increased demand for housing will help stimulate new construction and boost home sales. This increase will add approximately 3/8 of a percentage point directly to GDP growth through residential fixed investment and will employ many more workers in construction and at other housing related firms.
2. Rising Prices = Increased Family Wealth = Increased Spending
With housing being the biggest asset of most American households, rising house prices directly affect the balance sheet of homeowners. Home equity is the largest component of net wealth for many families.
3. Small Business Development is Funded through Home Equity
Rising house prices will help the economic recovery by spurring small business formation, as a business owner’s home often serves as collateral for a start-up.
It’s a lot of numbers and a lot of facts, but the overall economic picture is improving for most Americans. As a homebuilding company we are proud to be part of the engine driving the economic recovery.
– Randy Sebastian, President, Renaissance Homes