Friday, June 3, 2011

NEW HOME CONSTRUCTION KEY TO US RECOVERY

Housing prices were down 4.2% in the first quarter of 2011 and have recently fallen back to levels that have not been seen since 2002. The most drastic falls have taken place in the 20 largest United States metropolitan areas.

Housing prices are a strong barometer for the health of the economy and without new housing coming on line, it will take a lot longer to get back to anything that looks like hope.  Here are three reasons new home construction needs direct help from the Federal Government.

1. Rising Housing Prices Help Fuel Job Growth
Economic growth in the United States is always fueled by a bubble taking place in some sector. The boom of the '90s was started by the tech bubble. The rise in housing prices in the 2000s helped to fuel the last period of economic expansion in the United States. New home construction drove most of the industries in the country. Jobs were created in the construction industry, manufacturing sector, retail sector, and financial industry all due to new home sales, and rising home prices made the housing sector a hotbed for investors and homeowners alike. Once this bubble contracted, however, housing prices dropped and the economy fell off a cliff.


2. Job Growth Increases Consumer Confidence
Consumer confidence is such a fragile thing. Consumers have to feel good about the economy so they will spend money. When housing prices are declining and the unemployment rate is rising, new home buyers feel less optimistic and thus hold on tighter to their money. Low consumer confidence means less investment and less purchasing of goods and services. But when rising housing prices fuel job growth, consumer confidence also gets an uptick.

3. Consumer Confidence Leads to Increased Spending
When consumers are confident that housing prices are rising and unemployment is dwindling, they're more likely to make large purchases again like new homes.

Now you can see why new home construction is so important to the United States economy. It affects the attitude and actions of everyday investors and individuals.

In order for the United States to experience long-term economic growth, housing prices will need to stop their precipitous fall. Housing prices do not need to rocket upward swiftly, but they do need to stabilize so that modular home factories, their builders and potential new home buyers start to get that loving feeling again.

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