The Importance of Real Estate

How Does Real Estate Affect the U.S. Economy?
The article above, written by Kimberly Amadeo, contains information about how the economy is tied to real estate in many ways. Families benefit from real estate by owning a home which provides them with a place to live. A home is also a valuable asset to own to provide security in uncertain times. Businesses acquire corporate real estate to run their everyday operations. These businesses create millions of jobs for people in the community. The construction of real estate also bring jobs into a community. Real estate construction has been down from 8.9% in 2006 to 5% in 2011. Since the downturn in 2008, businesses have been reluctant to build and expand. But as we head into 2013, I would venture to guess that construction will start to pick back up as the economy heats back up again. In response to increased real estate construction, unemployment should start to decline because of the increase in construction jobs, as well as the jobs the new buildings will create.

Financial Crisis Explained

The financial crisis of 2008 was a prime example of how real estate can effect the economy. The crisis was rooted within the housing industry. Legislation had been passed to make owning a home more affordable by making it easier to be approved a home loan, or mortgage. People who had no credit, bad credit, or even no proof of income were given these mortgages. Banks did not mind giving out these sub-prime loans because they would just package them off and sell them to financial institutions. The investors bought the mortgages anticipating a nice return, but because of the low grade of a lot of the loans, home owners began to default on their mortgage payments. Eventually, so many loans were defaulted and houses foreclosed, houses began to decline in value for the first time. The financial institutions were losing money and were on the verge of bankruptcy. In the midst of the housing crash, the U.S. experienced the worst recession since The Great Depression. The economy is still in recovery, but the future of real estate is getting more promising every day.