How Real Estate Affects the Economy

Real estate plays an integral part in shaping the world’s economy. The housing of families depends on residential real estate and it is the greatest source of wealth and savings for many people around the world. Apartment buildings, which fall under commercial real estate, offer the creation of jobs and spaces that can be used for retail, offices, and manufacturing. The real estate business and investments offer many people a source of revenue for billions. The construction of real estate is labor-intensive and one of the major sources of job creation.

In real estate, construction is the only part in it that is measured by GDP. Real estate also affects other areas of the economy that are not necessarily measured. A decline in real estate sales may lead to a decline in real estate prices. This means that the value of homes is lower, even if the homeowners are selling them or not. If this happens, the number of home equity loans that are available to owners significantly.

A reduction in consumer spending can contribute to a downward spiral in the economy and if there is no interference by the federal reserve to reduce interest rates, then that means the country could fall into a recession. The good news about lower home prices is it lessens the chances of inflation in the economy.

Real estate requires a lot of maintenance and upkeep. Because of this, there will always be a need for gardeners, construction workers, and home repair professionals. The creation of jobs drives the economy because those people will most likely drive vehicles that cost money and use fuel which drives the economy. These people also own or rent their homes, enabling the cycle to continue on.

Home improvement is also another way real estate drives the economy. Just like gardeners and construction workers, home repair professionals will also have to drive vehicles and spend money on fuel, which further drives the economy. When homeowners improve or repair their homes, they need to buy the raw materials needed for the task. This drives the economy of the lumber and metal industries, for example.

The economic crash of 2008 hugely impacted the real estate industry. The values in homes dropped, making equities in people’s homes to disappear, leaving them with no money to spend on other things. The recession affected the economy significantly and put many people out of jobs, which meant many people were out of money. The recession slowed down the economy of the whole world, which is why it is referred to as the Great Recession. The definitions of recession and stock market are standardized, but the same cannot be said for the real estate market. Real estate magnates like the Soloviev Group, headed by Stefan Soloviev, develop ways in which they can cushion themselves during economic crashes and also cater to their clients effectively.

Candice Cearley

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