- The Washington Times - Wednesday, December 1, 2004

When a new home comes on the market, it is another sign of how the real estate industry drives the economy. A house, unlike any other large purchase product, is a culmination of hundreds of products and services in one purchase, which explains partly why houses cost so much.

The Commerce Department reported last week that new-home sales across the United States unexpectedly rose 0.2 percent in October, reaching the third-highest level on record.

At that rate (after seasonal adjustment), builders would sell more than 1,226,000 homes by year’s end. The median sales price of a new home was also on the up, standing at $221,800. The average price was $286,700.

As the economy continues to strengthen, we should see even stronger demand for new homes in the coming months, especially if interest rates remain below 6 percent.

If you consider what it takes to build a house, you’ll understand why a strong real estate market feeds the economy such financial nutrition.

The builder isn’t the only company finding work when you decide to buy a house. You would expect the builder to have his own construction crews — and most do — but then he may subcontract the finish work to other companies.

After the builder, there are plumbers, electricians, drywall hangers, painters, window installers, siding installers, bricklayers and landscapers who will all benefit from the sale of a new home. Many of these folks don’t work for the builder but have their own companies.

Just in this group, you’ll begin to understand how much product is being created for the building of one house, not to mention a whole development (with hundreds or thousands of homes). If builders sell 1,226,000 houses, that means 1,226,000 orders for flooring, water heaters, concrete, roofing supplies, electrical wiring and plumbing fixtures.

For some manufacturers, its an even larger boon to business. There aren’t many one-bathroom houses, thus the makers of bathroom items, such as commodes, sinks and vanities, receive double and even triple orders when a house goes up. Most homes have five major appliances, so the 1,226,000 homes will account for 6,130,000 washers, dryers, stoves, dishwashers and refrigerators.

Manufacturers of all the products put into your house benefit. Makers of bricks, siding, lumber, steel, electrical wiring, insulation, windows, roofing, flooring, concrete, asphalt and plumbing all benefit largely when the new home business is booming.

You also have to take into account the people who deliver the materials — the workers who load the trucks, the truck drivers and the mechanics who keep these trucks running.

Utility workers also get busy to wire the house for phone, Internet, cable and satellite hookups.

Once the house is built, there are the inspectors who will determine that it is in good shape, followed by a whole separate line of professionals involved in the sale of the house.

Realtors start the marketing and sales process. The mortgage, insurance and title companies line up to help finish the process.

However, the economic impact isn’t finished at settlement. New furniture, window treatments, more paint, wallpaper, electronics and all the gadgets that make a house a home get purchased.

The final businesses to get in on the score are the credit providers. Once homes settle, credit-card companies and home-equity-loan providers pull down the deed records to market to homeowners to see if they want to charge all of the residual purchases.

It’s a great thing when the new home numbers are up. It’s a great thing, indeed.

M. Anthony Carr is the author of “Real Estate Investing Made Simple.” Post questions at his Web log: (https://commonsenserealestate.blogspot.com

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