Housing Drives Economy

Glenn E. Crellin

Director, Washington Center for Real Estate Research

Washington State University

Throughout 2002 and early 2003, housing has been the shining star of the U.S. and Washington economies. Mortgage rates lower than any seen in 40 years overcame increasing unemployment and anemic general economic growth to push resale housing to record levels, while residential construction was strong, if not record setting.

The real estate, home building, mortgage lending and low-income housing industries have all approached the Washington Center of Real Estate Research for analysis of the economic impacts of their business. Since a project, which included an economic analysis of housing in the Washington economy was just completed, the timing is ideal to share those results based on the year 2000 and the structure of the state’s economy at that time.

This analysis is based on a detailed input-output model, which estimates economic impacts of identified events. The events estimated here included the resale of 119,390 single family homes at a median price of $176,300; the construction of 25,518 single-family homes at an average price of $225,700; the construction of 13,665 residential units in buildings with two or more units, actual rents on 804,413 rental housing units and rent-equivalents on 1,466,985 owner occupied homes.

The model estimates direct impact and multiplier impacts (meaning the expenditures by the persons and businesses who receive the initial expenditures). Estimates of economic output, employment and employee compensation were reported.

Housing in all its dimensions produced economic output totaling $39.6 billion in 2000, equivalent to 10.7% of the state’s economic activity. It generated 228,635 jobs, providing employment to 6.4% of the state’s workforce. Employee compensation (excluding compensation to business owners) totaled $5.9 billion in 2000. Realizing that home resales were 11.6% higher (and more expensive); building permits were 3.2% higher and the number of owned and rented units had both increased (and become more costly) in an overall economy which has contracted a bit – the role of housing in 2002 was even more vital.

Statistics on Washington’s housing market and other useful information are available on WCRER’s Web site: www.cbe.wsu.edu/~wcrer. For other information on real estate markets around the State of Washington, or general information about the real estate industry in the state (excluding legal questions), readers can reach the WCRER at 1-800-835-9683.

March 2003