Call it new residential construction, tract houses, "spec" homes, or production home building - whatever you call it, it's the straw that stirs the soup in these United States. Did you ever pay attention to how many livelihoods are linked to the homebuilding industry, and how new home starts are mentioned in each and every economic forecast worth its salt in this country?

According to the National Association of Home Builders, residential construction stimulates the economy directly by generating jobs, wages, and tax revenues both directly and indirectly as the demand for goods and services created by the construction of new homes has a "ripple" effect throughout the American economic system.

The construction of 1,000 single-family homes alone generates 2,448 full-time jobs in construction and construction-related activities, $79.4 million in wages, and $42.5 million in combined federal, state and local revenues and fees. It may be difficult to gauge the indirect impact, but think of every item related to a home, such as appliances, cabinets, furniture, windows, roofing, lumber, and even furniture, and you can imagine how far-reaching the effect of the construction of just one new home really is.

The September, NAHB forecast for single family home construction for the year 2000 numbers 1.225 million, and multifamily home construction at .312 million, making a combined 1.536 million new homes produced during the double-zero year. The forecast for 2001 sees little change, according to Andrew Kochera of the National Association of Home Builder's statistical research department.

Over half (50%-60%) of all new homes built in the United States are built by production home builders, with 28% or so of the new homes being custom or spec-built by individual land owners. With 70% of homes sold located on land that was builder-owned, this accounts for the largest percentage of homes built in the U.S. These builders' efforts are more densely concentrated in the Western and Southern states, with the fewest in the Northeastern U.S., where land is less available, and smaller tracts or in-fill housing is more prevalent.

This translates into the relative likelihood that the consumer will, by and large, buy a tract home or spec-built home sometime in their lives if they do buy new construction. (Spec-built may mean an individual builder will buy land, put up several of his own choices of floor plans, and sell them on speculation, which is not unlike a production home builder on a much smaller scale).

So here's the rule of thumb that many economic forecasters like to rely on. When housing starts are healthy, all is right with the economic world in general. And when you begin to see consistent dips in these statistics, it's time to start being concerned. Just think, though. Although existing homes may account for over 80% of homes sold in the United States, they had to start somewhere. It seems likely that the remainder of this statistic can be the reason for so many smiles at Building Industry Association meetings across the country these days. And from what I hear, most of us who are close to the home building industry won't take it for granted this time.

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Published: October 1, 1999

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A veteran of the real estate and homebuilding industries since 1986, Dena Kouremetis first joined Realty Times as a new homes writer in 1998. Since then, she has authored four books, written consumer columns on new homes issues for websites and newspapers all across the country, contributed to builder trade magazines, appeared as a guest expert on several radio shows and even created a ten-chapter podcast for LendingTree.com’s homebuilder website, iNest.com, now available on iTunes, entitled Uncharted Waters; Navigating the Purchase of a New Production Home. Kouremetis recently joined her local Folsom, CA Coldwell Banker office as a broker associate while continuing to write for the real estate industry. For the past three years, she has been training real estate agents for both the resale and new homes industries, putting her experience, research expertise and gift of expression to work to help others entering the business.