How Home Sales Affect Local Economies, Including Yours

It’s easy to get completely wrapped up in one part of an industry—say multifamily, industrial, medical office, retail, and so on—and not consider another part. Many CRE professionals don’t work with residential housing for sale (even if some monitor it for its effects on local apartment trends.) They aren’t in that area of development, building, or sales.

But, as the National Association of Realtors recently noted, home ownership has a big impact on economies, whether local, state, or national. According to the organization’s estimate, a home sale at median price created a $113,159 economic impact in 2021.

There’s the income from real estate industries (28.1% or $31,742), expenditures connected to the purchase of a home (4.4% or $5,000), new home construction (51.9% or $58,781), and a multiplier effect from housing-related spending (15.6% or $17,636). 

But that’s at a median cost. It can run much higher. The top ten states or districts for economic impact are Hawaii ($306,130), District of Columbia ($280,180), California ($246,700), Massachusetts ($191,680), Washington ($187,630), Oregon ($176,460), Colorado ($169,220), Idaho ($160,600), New Jersey ($158,100), and New Hampshire ($156,140). As $113,159 was based on a median-priced house, there will also likely be states with significantly lower figures.

NAR also estimates a significant job impact, with every house sale generating two jobs. “The ratio is derived from the economic impact of an existing home sale and the average amount of earnings,” the report says. “While each home sale contributes about $113,000 to the economy, U.S. workers earn an average of $57,300. Putting these figures together reveals that every home sale generates two jobs.”

As with the economic impact, the specifics will vary on local conditions. The group says that in California and Hawaii, the impact is three jobs per sale, not just two.

All well and good, but a pile of information without further context can be nothing more than figures on a page. The potential use of the information for CRE professionals would likely be not as a curiosity to bring up at a cocktail party, but as information to use in arguing and lobbying for government policies and resources to support real estate and local development. 

That would start with house building to help bridge the growing massive housing shortage that has faced the country for a decade or more. Then, as more people can move into houses, there’s the creation of jobs and economic activity which also means more need for office and retail space, industrial, medical office, and more.