3 minute read
The Economic Impact of Home Building
By Mari Krashowetz, Southern Utah Home Builders Association Executive Officer Photo courtesy of Ence Homes and Utah Valley Video
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In 2002, President George W. Bush proclaimed June as National Homeownership Month with the goal of helping families achieve the American Dream. Although the economy has seen many ups and downs over the last two decades, owning a home is still the goal of a large majority of American families.
Home ownership plays a vital role in creating stable communities. It bolsters the local treasury through taxes and yields many social benefits, including lower crime rates, increased volunteerism, and greater fiscal stability. Beyond that, home ownership provides benefits that are personal to the homeowner, such as tax deductions, improved health, ownership pride, and community belonging.
New home construction has proved to be even more beneficial to a community. The rise or fall in the number of new homes sales is a broad economic and social indicator. A high number of new home sales (or new residential sales) indicates a more stable or growing economy, but it also signals high rates of employment, social stability, higher wages, business growth and stability, tax base growth, and an improvement in local amenities like parks and trails. New home construction benefits homeowners and the communities in which they reside! Southern Utah has seen a rise in new home construction and sales over the past several years. With mortgage interest rates still at relatively low levels and with the amount of resale inventory decreasing, now might be an ideal time to achieve the American Dream of homeownership by purchasing a newlybuilt home.
The National Association of Home Builders (NAHB) estimated that the one-year impact of building one hundred single-family homes in a typical local area included: • $28.7 million in local income. • $3.6 million in taxes and other revenue for local governments. • 394 local jobs. The additional annually-recurring impacts of building one hundred single-family homes in a typical local area include: • $4.1 million in local income. • $1.0 million in taxes and other revenue for local governments. • 69 local jobs. These are ongoing, annual, local impacts that are the result of the new homes becoming occupied and the occupants paying taxes and participating in the local economy year after year. These statistics include the effect of increased property taxes based on the difference between the value of raw land and the value of a completed housing unit on a finished lot. Price and Interest Rate Increases
The increase in the price of a new home will undoubtedly have an impact on housing affordability. The challenges to maintaining affordability include building material shortages, labor shortage, government regulations, and other factors. A $1,000 increase in the price of a median-priced new home will further price 117,932 U.S. households out of the market. Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.5 percent with zero points on a thirty-year fixed-rate mortgage can price over 1.1 million U.S. households out of the market for the median-priced new home. Good News
With people spending more time at home to live, work, and play, new homes feature floor plans that suit modern lifestyles and include energy-efficient features to decrease monthly expenses. Working remotely is becoming more popular and opens up the option to live anywhere. Millennials are leading the growth in the number of new home buyers. As the nation’s largest demographic group, more than seventy million millennials are poised to dominate the homebuying market in the months and years ahead. This will sustain the need for new homes to be built.
New homes improve the quality of life for our community and add to the local and national economy. So if you are looking to immerse yourself in a community, build equity, and settle down, buying a new home is worth considering.
