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| More rates and news from Commercial Boom May Be Preventing Housing Collapse(There have been numerous forecasts and other articles calling for a housing crash or collapse.)
Each month, the housing market gets worse and worse (for everyone except buyers) but nothing catastrophic has happened.
Even as the optimistic reports of the market stabilizing have not come true, the U.S. market seems safe from recession. Why?
While the real estate and housing industry has been exploited over the past year on the morning, daily and nightly news, not to mention also by every news publication and Internet media, there has been a lack of focus on one key aspect of the industry that may be saving the national economy from falling.
Nell Henderson explains how a different aspect of real estate should be heralded as the hero sustaining the national economy, in the article, “Commercial Boom Softens Housing Bust,” published in the November 27, 2006 edition of the Washington Post.
“Inspecting the progress as she crosses the bare concrete floor, stepping around the pipes and exposed wires and pointing with pleasure to the gleaming metal frame where the menu board will hang, Christy Gilligan envisions how the place [Arby’s] will look when hungry commuters rush in after work for a quick bite, entering through a glass foyer with a two-story cathedral ceiling into a dining room seating 84.”
“‘I see opportunity,’ said Gilligan, vice president of development with ACW Corp., of Wilmington, Del., a family-owned Arby's franchiser building the restaurant, its fourth in Prince William County.”
Apparently many other executives see this opportunity as well, as non-residential construction has been boosted enough over the past year to support the steady decline of residential construction. This, in turn, has helped cushion the impact of the housing slump on national economy.
“The nation's harshest housing downturn in 15 years has unquestionably inflicted pain on many homeowners, builders and their suppliers. The plunge in new home construction was severe enough alone to slice a full percentage point off the nation's economic growth in the July-through-September period, depressing the increase in total economic output to a sluggish 1.6 percent annual rate.”
Thankfully, the rest of the economy is still thriving with low unemployment rates, high consumer spending and a flourishing stick market.
And there is still much work to be done for commercial construction. The housing boom, which lasted from 2000 to 2005, demanded construction for so many new neighborhoods that builders now have to play catch-up to create stores, restaurants, offices and other services to support the new housing developments.
“The money spent on private non-residential construction nationally rose a sizzling 19.2 percent over the 12 months that ended in September, according to Census data. Public construction rose a robust 11.6 percent in the year ended in September.”
If you carefully add everything up, the increase in non-residential construction has more than offset the 6.7 percent decline in home building over the same period. So, in essence, the value of all real estate related construction rose a net 2.9 percent.
“‘The expected further weakening in housing activity is likely to be largely offset by business capital spending,’ Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, said in a speech last month.”
This is not to say that the U.S. housing market is not going to continue to struggle, but it does suggest that the hosing woes will not affect other aspects of the economy, which is something that could have had a detrimental impact.
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