REAL ESTATE AND THE ECONOMY Essay Example | Topics and Well Written Essays - 1250 words

REAL ESTATE AND THE ECONOMY - Essay ExampleThe paper, however, discusses it in the U.S. context and explains that how it forge the economy. Real Estate and its Impact on U.S. Economy Real land markets potency or weakness has huge influences on U.S. economy. It was hard to admit that financial system was broken aft(prenominal) the collapse of objective estate bubble. Development in real estate is closely linked with the U.S. economy and its role cannot be ignored in our future progress (Babigian, 2011).U.S. real estate market is carve up into commercial and residential real estate. Real estate constitutes several important aspects of economic activity. It has remove and collateral impact on the level and composition of real gross domestic product (gross domestic product).In addition to rude(a) construction, real estate is a lasting asset which holds crucial balance sheet effects. For instance, lasting amplification in household net worth that originates from rising real hou se prices suppose to trigger household spending on goods and services. There is a general agreement on the effect of wealth on household behavior however, its magnitude is somewhat less agreed upon (Missouri, 2007, p.1).According to Missouri (2007) Currently residential set investment comp musters a little less than 5 percent of GDP. There be myriad of direct and indirect effects associated with real estate that spill over into the other aspects of economy, such as the requisite for lumber, labor and other commodities used in the construction of structures or in remodeling activity.(p.1) There is fairly sizable nonresidential component in the U.S. real estate economy. Determinants of new construction in this sector are comparatively different because commercial or industrial structure is established asset and business willing only invest in it if rate of return is at least comparable to its opportunity equal (Missouri, 2007, p.1).Real estate industry contributed over $1,472 bil lion to U.S. GDP in 2005 that amounts to 11.9 percent of total GDP. The value added from real estate, leasing, and rental practices increased to over $1,731 billion (13.2 percent) of total GDP in 2006(Anari,2008,p.2).According to Anari (2008), In 2006, Texas real estate industry was the second most important private industry after manufacturing. The industrys role to the states GDP in 2005 was more than $79 billion that amounts to 8 percent of the Texas GDP (p.2). Real GDP is the most extensive measure of goods and services produced in country in a particular time period. Among the major components of GDP, structure shared approximately 10 percent for last 25 years. In addition, other goods and services are associated with structure, such as furniture, utilities, and roads. Generally, residential expenditures are larger than that of nonresidential structures. In 2007, residential fixed investment constituted approximately 30 percent of the total private fixed investment while nonr esidential structures constituted 20 percent. Residential fixed investment rise from 2000 to 2006 is considered to be quite unusual (Missouri, 2007, pp.2-5).In 2007, According to Missouri (2007) Construction spending has totaled a arcminute less than $1.2 trillion at a seasonally adjusted annual rate, with private construction outlays comprising a little more than three-quarters of the total and public construction outlays the remaining one quarter. (p.5) There has been a sound upward shift