As Housing Industry Builds Up, Other Sectors Follow
When fortunes rise in the housing industry — as they currently are — it tends to lift sales for other businesses, too. Home construction, sales and prices are all improving. And according to many analysts, the market is gaining steam.
For nearly two decades, Scott Gillis has owned his own moving company, Great Scott Moving in Hyattsville, Md. Moving high season is just around the corner, which means Gillis is hiring.
"I'm doing it right now, I'm calling up all my old employees. Basically, I'm doing as much as possible 'cause I'm anticipating we're having a good summer," Gillis says.
That's in contrast to several years ago, when Great Scott moved more people into rental apartments than houses — as its sales and staff plunged by a third. Gillis says things have improved. But they're still very hard to predict.
'The Mood Is Much Better'
"I think the mood is much better than it was five years ago. I think we are heading in a better way," he says. "But nobody knows the forecast."
The federal spending cuts known as the sequester don't help. And there are pockets of housing weakness. Still, overriding all that, he says, is a sense that things are fundamentally better and improving.
"When you start seeing larger offices going to smaller offices, it's an indicator that everybody's cutting back. Now I see offices getting larger. And that's usually a good indicator," Gillis says.
Part of what's driving the urge to move is that people are spending again.
"This housing market recovery is a tremendous boost to the economy," says Lawrence Yun, a chief economist for the National Association of Realtors.
A Powerful Economic Boost
Yun says residential construction, remodeling, moving, gardening and furniture buying add up to about 20 percent of the country's gross domestic product — which is why the upward momentum in housing is such a powerful boost to the economy.
But it's not just that. Yun says by year end, U.S. homes will collectively be worth $3 trillion more than they were at the bottom of the market. "And that will provide a significant boost in consumer spending" — $100 billion in extra spending this year, to be exact, he says.
Eric Belsky, Joint Center for Housing Studies director at Harvard University, says there's an aphorism about collective psychology in real estate: When the housing market turns, it sounds a whistle that only dogs and homebuyers hear.
"You kind of get the sense that that whistle's been blown," he says.
Low Inventory, Higher Prices
Belsky says a low inventory of homes and greater demand are driving prices up.
"That's creating a certain amount of momentum in the market, it's making house prices turn around," he says. "What it hasn't been doing is getting as many people to put their homes on the market."
Comparisons to prior years aren't always helpful, he says, because sales had been boosted by first-time homebuyer tax credits. This year is different.
"This is happening because the market itself is kind of finding its own sea legs and moving up," Belsky says. "And once that happens, that market turns, it tends to have momentum."
When asked if he's subject to the psychology of housing, he says: "I think we all are. It's nice to feel that house prices are beginning to move up. Have I been spending more? I don't know."
'Customers Are Coming In'
Home improvement retailer Home Depot is hiring 80,000 people for its spring season. And Lowe's plans to hire 9,000 extra workers this year — on top of 45,000 seasonal hires.
"We are investing more labor, literally, in the aisle today, because we know that customers are coming in not just for a single maintenance item or a replacement item. They're coming in to engage in projects, and that takes some face-to-face time," says Greg Bridgeford, Lowe's chief customer officer.
He says housing isn't just contributing to customers' sense of economic well-being.
"We're seeing them engage emotionally in their homes again as they have more confidence financially," Bridgeford says.
It's also starting to contribute to their happiness, he says.
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Transcript
AUDIE CORNISH, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
ROBERT SIEGEL, HOST:
And I'm Robert Siegel. We begin this hour with the nation's housing turnaround. Home construction and sales are improving, and prices are up in much of the country. According to most analysts, the market is finally gaining steam.
And that is good news for the broader economy. As NPR's Yuki Noguchi reports, when fortunes rise in the housing industry, it lifts lots of other businesses with it.
YUKI NOGUCHI, BYLINE: For nearly two decades, Scott Gillis has owned his own moving company, Great Scott Moving in Hyattsville, Md.
(SOUNDBITE OF ENGINE STARTING)
NOGUCHI: Moving high season is just around the corner, which means Gillis is hiring.
SCOTT GILLIS: I'm doing it right now - I'm calling up all my old employees and basically, I'm doing as much as I possibly can because I'm anticipating we're having a good summer.
NOGUCHI: That's in contrast to several years ago, when Great Scott moved far more people into rental apartments than houses as its sales, and its staff, plunged by a third. Gillis says things have improved, but they're still very hard to predict.
GILLIS: I think the mood is much better than it was five years ago. I think we are heading in a better way, but nobody knows the forecast.
NOGUCHI: Those spending cuts known as the sequester don't help. And there are still pockets of housing weakness. Still, overriding all that, he says, is a sense that things are fundamentally better - and improving.
GILLIS: When you start seeing larger offices going to smaller offices, it's an indicator that everybody's cutting back. Now, I see offices getting larger. And that's usually a good indicator.
LAWRENCE YUN: This housing market recovery is a tremendous boost to the economy.
NOGUCHI: Lawrence Yun is chief economist for the National Association of Realtors. He says residential construction, remodeling, moving, gardening and furniture buying add up to about 20 percent of the country's gross domestic product, which is why upward housing sector momentum is such a powerful boost to the economy.
But it's not just that. Yun says by the end of the year, U.S. homes will collectively be worth $3 trillion more than they were at the bottom.
YUN: And that will provide a significant boost in consumer spending.
NOGUCHI: A hundred billion dollars in extra spending this year, to be exact. Eric Belsky is director of the Joint Center for Housing Studies at Harvard University. He says there's an aphorism about collective psychology in real estate. It says, when the housing market turns, it sounds a whistle that only dogs and homebuyers hear.
ERIC BELSKY: You kind of get the sense that that whistle's been blown.
NOGUCHI: Belsky says low inventory, and greater demand, are driving prices up.
BELSKY: That's creating a certain amount of momentum in the market; it's making house prices turn around. What it hasn't been doing is getting as many people to put their homes on the market.
NOGUCHI: Comparisons to prior years aren't always helpful, he says, because sales had been boosted by first-time homebuyer tax credits. This year is different.
BELSKY: This is happening because the market itself is kind of finding its own sea legs and moving up. And once that happens - that market turns - it tends to have momentum.
NOGUCHI: Do you find that you're sort of subject - yourself - to some of the psychology of housing?
BELSKY: (LAUGHTER) I think, you know, we all are. It's nice to feel that house prices are beginning to move up. Have I been spending more? (LAUGHTER) I don't know.
NOGUCHI: Home-improvement retailer Home Depot is hoping people will. It's hiring 80,000 people for its spring season, on top of other permanent hiring. Lowe's plans to hire 9,000 extra workers this year, in addition to 45,000 seasonal hires. Greg Bridgeford is Lowe's chief customer officer.
GREG BRIDGEFORD: We are investing more labor, literally, in the aisle today because we know that customers are coming in not just for a single maintenance item or a replacement item. They're coming in to engage in projects, and that takes some face-to-face time.
NOGUCHI: He says housing isn't just contributing to customers' sense of economic well-being.
BRIDGEFORD: We're seeing them engage emotionally in their homes again, as they have more confidence financially.
NOGUCHI: It's starting to contribute, he says, to their happiness.
Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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