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.