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Why Housing Is Often an Economic Harbinger

Economists and government officials alike rely on a few key performance indicators to determine where the economy is and where it is headed. Housing is one of those indicators. Measuring the state of the housing market tells us a lot about the economy, both nationally and regionally. It is such a powerful economic harbinger that it can tell us things about the economy we would not know otherwise.

So what is it about housing that makes it such a valuable treasure trove of economic information? It is not the actual houses themselves. Rather, it is the need for housing we humans have. We consider housing a basic human necessity in the same league as food, water, and clothing. Therefore, we will find a way to get it – even if that means living in a tent in the middle of downtown.

Housing and Local Economics

Housing is one of the few markets that is driven almost entirely by supply and demand. Unlike travel, entertainment, and other similar things, housing is a need that government finds exceedingly difficult to manipulate. For example, a state economic development agency can pull out all the stops to convince you to travel there as a tourist. There is nothing they can do to convince you of your need for housing. You are fully aware of the need on your own.

Knowing that, the main driver behind housing in any given area is local economics. People live where they live because it is where they work and play. Of the two, work is more important. If jobs dry up, people leave. They go to wherever they can find jobs. Thus, you can see the intrinsic relationship between employment and housing. Where employment is strong, the housing market tends to be strong as well.

Also consider the fact that local economics almost always impact the job market. A strong economy creates job opportunities by encouraging new business startups and growth among existing businesses. Weak economics drive companies and jobs out. So ultimately, economics and housing are tied together.

The Proof Is out There

Anyone who doubts the intrinsic link between economics and housing need only look around for the evidence. The proof is out there, especially in metros like Salt Lake City, Utah. Salt Lake City has been a hotbed for employment and housing for a number of years now. It has the right combination of things that attract businesses to the area.

Though much has changed since the start of the coronavirus crisis, a 2018 report detailing Salt Lake City’s housing market told the whole story. Some 35,000 jobs were added to the region in 2018. That is pretty impressive for a metro with a population of just over 200,000.

Meanwhile, a myriad of new housing projects got underway that year. New houses were not just luxury homes for the wealthy, either. Builders were building homes for the entire spectrum of buyers knowing that demand required it. Lofts, condos, starter homes – everything was on the table.

CityHome Collective, a Salt Lake City real estate broker and interior design firm, says that area demand is still strong despite challenging economics nationwide. That is because Salt Lake City continues to enjoy strong employment and business investment.

As Housing Goes

The link between economics and housing makes it clear that as one goes, so does the other. Economists can look at housing demand and get a good idea of where the economy stands. As housing declines, it signals economic downturn. Emerging strength in housing indicates a rebounding economy. The patterns are not hard to recognize if you know what you’re looking for.