The real estate and construction sectors, including the many professions and fields associated with them, are among the larger components of the global economy.
As of early 2017, the U.S.
Bureau of Labor estimated that 6.41 million Americans were employed in the construction industry (up from 6.25 million at the beginning of 2016, and down significantly from a peak of 7.6 million in 2007).
The agency also estimated that 1.57 million Americans were employed in the real estate industry as of early 2017 (up from 1.51 million at the beginning of 2016).
There was $14.3 trillion in outstanding mortgage debt of all types in America at year-end 2016, up from $13.8 trillion one year earlier, including homes and commercial projects.
This total included $10.2 trillion in home mortgages, up from $10.0 trillion in 2015.
Home prices have rebounded dramatically from the depths of the recent recession.
In fact, prices have risen to the point that bargains are hard to come by.
In mid-2017, there was very little inventory of homes for sale in markets such as Denver and San Francisco, leading to bidding wars among buyers.
More than a few observers are concerned that another housing bubble is developing in the most popular markets, both in the U.S.
and in many major markets worldwide.
In the U.S., home sales volume has picked up substantially from the dismal years of
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The real estate and construction sectors, including the many professions and fields associated with them, are among the larger components of the global economy. As of early 2017, the U.S. Bureau of Labor estimated that 6.41 million Americans were employed in the construction industry (up from 6.25 million at the beginning of 2016, and down significantly from a peak of 7.6 million in 2007). The agency also estimated that 1.57 million Americans were employed in the real estate industry as of early 2017 (up from 1.51 million at the beginning of 2016).
There was $14.3 trillion in outstanding mortgage debt of all types in America at year-end 2016, up from $13.8 trillion one year earlier, including homes and commercial projects. This total included $10.2 trillion in home mortgages, up from $10.0 trillion in 2015.
Home prices have rebounded dramatically from the depths of the recent recession. In fact, prices have risen to the point that bargains are hard to come by. In mid-2017, there was very little inventory of homes for sale in markets such as Denver and San Francisco, leading to bidding wars among buyers. More than a few observers are concerned that another housing bubble is developing in the most popular markets, both in the U.S. and in many major markets worldwide.
In the U.S., home sales volume has picked up substantially from the dismal years of the 2007-09 housing bust and recession, resulting in rapidly rising prices in many markets and a shortage of available homes in the most desirable neighborhoods. This big turnaround was fueled by many factors. The most significant may be the efforts by the U.S. Federal Reserve to hold interest rates down to extremely low levels, which significantly reduces the monthly payments of home buyers who take out mortgages. Another boost to the market is new household formation by members of Generation Y. The oldest members of this segment were turning 35 years of age by 2017. Many had been living with their parents for much longer than normal, due to the recession. While it is sometimes difficult for first time homebuyers to find an affordable home and qualify for a mortgage, Generation Y is boosting the market, both as buyers and as new renters. (Mortgage programs offering down payments as low as 3% will accelerate sales to first-time buyers.)
An additional factor is that the market has seen a steady decline in the number of foreclosed, bank-owned homes. Massive numbers of them were acquired by investors. A lower supply of bargain-priced foreclosures means higher prices and a stronger market for houses overall. Potential homebuyers are also feeling more comfortable financially, partly because the values of their stock market holdings have risen substantially in the recent past.
Construction of all types, including commercial, has enjoyed a strong market in recent years. About $1.18 trillion in new American construction was expected to be put into place for 2017, a seasonally adjusted annual rate as of January, according to the U.S. Bureau of the Census.
Home builders in the U.S. are once again enjoying robust sales and profits. Many are challenged in finding enough new lots for future building. In many markets, they are also challenged in creating new homes at price points that are attractive to first-time buyers, as lot prices are high and cities are often charging high infrastructure fees for each new lot.
Retail centers in the U.S. are seriously overbuilt, and there are too many stores trying to sell to too few shoppers. The end result of this glut has been large numbers of retail store chain bankruptcies. Many remaining chains have either curtailed expansion plans or are opening much smaller stores than in the past. Meanwhile, retail stores are facing dramatic competition from sales made over the internet. Online commerce is growing at stellar rates while mall traffic and store revenues are generally disappointing. Mall owners in many areas are accepting large non-retail tenants in an effort to fill up former department store sites.
Apartment house operators are enjoying brisk business in general. For the fourth quarter of 2016, the vacancy rate at U.S. apartments decreased to 4.1%, compared to 4.3% in the fourth quarter of 2015. These extremely low vacancy rates have been encouraging the construction of new apartment buildings at a rapid rate.
Over the long term, on a global basis, there will be continuing demand from the health care sector for new or remodeled properties, as the percentage of the population over age 65 continues to grow in many nations from North America to Asia to Europe, boosting the need for medical care and assisted living centers.
Another growing trend in construction in major economies is to incorporate a higher number of energy conservation technologies in new buildings. This is true in both residential and commercial construction. Several “green” building certification plans are now in place, so that architects and builders may seek to attain certain energy conservation and eco-friendly standards.
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