Here’s how and how much real estate contributes to the local economy
Each year during the month of June, the Northeast Tennessee Association of REALTORS® (NETAR) takes the opportunity to celebrate homeownership by showcasing some of the social and economic benefits that protect and promote the American Dream of homeownership.
Homeownership Month was created both to encourage current and future homeowners to be advocates for homeownership and to ensure they have their voices heard at local, state, and national levels of government.
To many, the very nature of owning a home offers people a sense of pride and security. It also represents a testament to one’s hard work and sacrifices. As an organization, NETAR believes it is vital to take time out to observe and promote homeownership not only for the personal benefits it provides but also because of its proven ability to strengthen American communities, offer long-term, generational building opportunities, and for the institutions’ ability to stabilize and solidify the broader economy.
To that point, real estate is an essential driver of economic growth. It accounted for more than 16 percent – $59.6 billion – of Tennessee’s Gross Domestic Product last year.
Here in the NE Tenn. and SW Va. region monitored by NETAR, real estate’s economic contribution to and place in the economy is significant. Home sales support a significant number of local private-sector jobs. Over this past year, thanks in part to a cadre of REALTORS®, a countless number of firms and individuals who also had a part in the sales of homes plus hardworking homebuyers, the real estate industry did its part to keep the local economy afloat during the pandemic.
The sales volume for existing home sales alone was $2.1 billion, but there’s more to the economic impact story. According to the National Association of REALTORS® (NAR), each typical home sale makes an additional $75,000 economic impact. That number comes from a compilation of data from the Bureau of Economic Analysis (BEA), the U. S. Census, the National Association of Home Builders (NAHB), Macroeconomic Advisers, and NAR’s original research.
Here’s a breakdown of how the four major components of that $75,000 per home sale moves through the economy:
- Income generated from real estate industries. That includes commissions, fees, and moving expenses, or income to real estate industries associated directly with each home sale. It accounts for $20,400 of each sale.
- Expenditures related to home purchases. This included $4,700 per sale for furniture and remodeling expenses. The number is based on a study by NAHB economists.
- Multiplier of housing-related expenditures. It accounts for $12,100 of each sale and is based on the fact that income earned in other sectors of the economy as a result of each home sale is re-circulated into the economy.
- New home construction. This part accounts for $37,800 from each sale. Typically, one new home is built for every six existing home sales. So, for every sale, one-sixth of a new home’s value is added to the economy.
Last year there were 8,944 existing home sales in the region NETAR monitors. When the economic impact of each sale is applied to the local economy, it amounts to $671 million. That’s just for existing home sales. New home sales and commercial real estate activity also make an additional contirubtion.
A separate NAR study shows that homeowners tend to be happier and healthier. On average, they vote more, volunteer more, and contribute more to their communities. And their children tend to perform better academically and socially, too. More on that study can be found on the NETAR Website at https://netar.us/homeownership-has-critical-social-economic-benefits/ .
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee – Southwest Virginia region representing over 1,400 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennesse