Is Real Estate Important?

Of course it is! I'm about to discuss why real estate is so important and what effects it has on the economy.

First things first. Why is real estate so important? Well there's only so much Earth to go around, don't you want to own some of it? Whether you own, rent, leave, or sell, real estate is a part of every person's life. Don Phelan's article Why are Real Estate Values so Important? does a terrific job of explaining how real estate affects everyone. Basically, Phelan explains to a high school business class why one of the students was working less hours than he had three years ago. The student stated that he worked at a restaurant for the past three years where most of the customers worked in construction. Phelan went on to say that "because it costs less for home buyers to buy a foreclosed property really inexpensively and renovate it themselves", trade workers are now out of work because they don't have any homes to build. Because they don't have jobs, they don't have money to come to the restaurant anymore. This is a perfect example of how real estate can affect you even if you're not the one buying or selling a home.

Another reason real estate is so important is it's ability to affect the economy. In the article Homes and Cars Point the Way for the U.S. by Justin Lahart, he discusses why the housing market might be a "brighter spot" in the U.S. Economy. Sales forecasts have increased  since January of this year. Even though these improvements haven't "fed through to other areas of the economy," I believe that in the long run if this trend continues, it will have positive effects on other areas of the economy as well as continued improvement in the housing market.

As we all know, real estate doesn't always 
positively affect the economy. In the article Fed's Q1 Flow of Funds: Household Real Estate Value Increased in Q1 by Bill McBride, he summarizes important points from the Federal Reserve's Flow of Funds Report. The chart that stands out to me most is the Household Real Estate Percent Equity chart (pictured right). As you can see, the biggest decline happened right at the start of 2009, right after the housing bubble burst at the end of 2007. but "in Q1 2012, household percent of equity (of household real estate) was at 40.7%- up rom Q4 and the highest since 2008.

Basically, real estate is important to everyone, whether they know it or not. It might affect how many hours you work, or how well the economy is doing, but no matter what it's affecting, it's ALWAYS affecting you.