Real estate is more than an industry, profession or service. In Alabama, the real estate industry is essential to the economic well-being and growth of the state, and the numbers bear it out. According to research by the National Association of Realtors® (NAR), the real estate industry accounted for $ 33.8 billion in 2020, or 15% of Alabama’s gross domestic product.
“The housing market is the driving force behind our economy,” says the Federal Mortgage Corporation (Freddie Mac). “It is a thread that runs through all aspects of our local and national economy, from construction to manufacturing. Homeowners also tend to buy more goods and use more services in their communities, which adds value to the economy. ”
The economic impact is clearly visible in the direct contribution of the industry to the state economy in key areas:
• Construction of houses
• Commission and brokerage services for real estate transactions.
• Mortgage credit lending
• Title insurance
• Rent and leasing
• House valuation
• Home inspection
• Moving services
Consumer spending on real estate transactions has a corresponding economic impact through:
• Expenses for renovation
• Purchase of furniture
• Purchase of household appliances
The sale of homes also leads to the construction of new homes. “Usually for every six houses sold, one new house is built. Thus, according to the NAR, for every sale of an existing home, 1/6 of the cost of a new home is added to the economy. ”
Less noticeable, but vital, is the effect of the “multiplier effect,” the income earned in other sectors of the economy from the sale of a house, which is then reused in the economy. Restaurants, retailers and service providers benefit from real estate sales as more income allows customers to spend more.
According to personal finance website The Balance, property sales are also creating ripple effects for local communities. Higher sales prices add value to all homes – even those that are not on the market. In turn, owners receive more equity capital, which allows consumer spending to grow. Consumer spending contributes to economic growth, employment and income.
Bottom Line: A healthy real estate industry in Alabama greatly contributes to a healthy state and local economy in general, where businesses thrive and neighbors enjoy and contribute to their communities.
Here’s a snapshot of the economic impact of a typical Alabama home sale:
Overall economic effect: USD 72,900
Income from real estate transactions: US $ 19,800 (27.1%)
Costs associated with buying a home: $ 4,700 (6.4%)
Housing Cost Multiplier: USD 11,800 (16.1%)
Construction of a new house: USD 36,700 (50.2%)