Explaining the National Economy's Real Estate Doldrums

Despite the housing boom in certain markets (such as New York, Los Angeles, and San Francisco), the real estate market is nowhere near the economic driver it once was.

1 minute read

April 25, 2014, 10:00 AM PDT

By James Brasuell @CasualBrasuell


“Investment in residential property remains a smaller share of the overall economy than at any time since World War II, contributing less to growth than it did even in previous steep downturns in the early 1980s, when mortgage rates hit 20 percent, or the early 1990s, when hundreds of mortgage lenders failed,” report Neil Irwin.

The problem is that the housing market is holding back the economic recovery of the entire economy. Explains Irwin: “If building activity returned merely to its postwar average proportion of the economy… The additional building, renovating and selling of homes would add about 1.5 million jobs and knock about a percentage point off the unemployment rate, now 6.7 percent. That activity would close nearly 40 percent of the gap between America’s current weak economic state and full economic health.”

Irwin examines Roanoke, Virginia to describe the sluggish market. One big reason for the market's malaise: lack of demand, in many cases caused by new patterns of “household formation.”

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