Real estate consumers have played a leading role in keeping the struggling economy from going completely bust.

Refinancing mortgages not only boosts households' bottom lines, it gives the economy a lift too. Home owners refinancing their mortgages in droves for the past two years are credited with 20 percent of the growth in the nation's gross domestic product (or GDP, a measure of the output of goods and services produced by labor and property in the U.S.), according to a new study.

Home buyers also help carry the economy, according to another recent study. California's new housing construction contributes $40 billion per year to the Golden State's not so golden, struggling economy. Home building is responsible for 359,000 jobs statewide and every dollar spent on new housing construction generates approximately $1.95 in total economic activity.

No one is suggesting you should refinance or buy a home to help prop up the economy. Both are personal decisions based on individual needs and goals. Home owners refinance for extra cash, lower rates, reduced monthly payments, loan term changes and other financial needs. Home buyers buy because they need a roof over their heads and see the home as a relatively low-risk, easily leveraged investment.

It is nice to know, however, that real estate consumer power helped keep the nation from what could have been a deeper recession. Likewise, the financial force that's pulling the nation out of the recession is led by real estate consumers.

"The Economic Contribution of the Refinancing Boom," research by West Chester, PA-based Economy.com, an international economic researcher, found that during the past two years, as mortgage interest rates dropped to historic lows, an estimated $2.5 trillion in mortgage debt was refinanced -- almost half of all outstanding mortgage debt.

Even without considering equity borrowing, refinancing alone amounts to one-fifth of the national economy's GDP growth of just over 1 percent per annum since late 2000, according to the report, commissioned by the Homeownership Alliance, a coalition of organizations supporting the nation's housing system.

Borrowers with large equity gains in the Northeast and West Coast provided the largest economic contribution.

The refinancing boom has generated more than $64 billion in cash in the Northeast and $63.3 billion in the Pacific region. The South Atlantic contributed $49.4 billion; South Central, $28.7 billion; the Midwest, $48.6 billion and the Mountain region, $17 billion.

Just build it

Likewise, "The Economic Benefits of Housing in California" extols the economic virtues of home building in California -- a beleaguered industry about to get a financial boost from the new "Homebuilder Right-To-Repair Law". Like similar laws in a growing number of states, it is designed to stem the tide against new home construction defect litigation. Hopefully, it will encourage much needed residential real estate construction and keep the price of homes from rising so fast that consumers are less able to help the economy during the next recession.

Only the combined wholesale/retail segment of the state's economy matches the economic power of California real estate, both contributing 13 percent of the state's total industry output -- twice as much as other sectors, according to the Sacramento Regional Research Institute, which authored the report released by the Job-Center Housing Coalition.

Published: December 30, 2002

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.