Real Estate Market

Housing bust withered California's economy, job market

(9/27/2010) When housing went down in the Golden State it took Californian jobs and a chunk of the economy with it. The bust has cost the Golden State hundreds of thousands of jobs, and $54 billion in economic output.

According to "The Economic Benefits of Housing," study by the California Homebuilding Foundation, an economic research and consulting group, every newly constructed single-family home generates 3.24 jobs during construction and supports another 1.2 jobs, and each dollar spent building a home generates another 80 cents in total economic activity.

With deep fissures in the economic cornerstone, new housing construction alone contributed only $13.8 billion to California's economy in 2009 and nearly 77,000 jobs, down 80 percent from $67.7 billion in economic output and a whopping 84 percent from 487,000 jobs when the home-building boom peaked in 2005 statewide.

At the peak, the 205,000 new homes permitted accounted for almost 3 percent of the state's total economic output. That fell to 0.4 percent in 2009, when only 35,000 new homes were permitted statewide, the study says.

Even at the peak, the number of new homes permitted fell below the 220,000 that the state Department of Housing and Community Development said are needed annually to meet normal population growth.

It's not just the direct economic effects of the new home building industry's construction efforts.

Toss in a range of related services including remodeling, repair, brokerage, property management and financing and the housing industry generates more than $347 billion of economic output and supports nearly 1 million jobs statewide, according to the study.

Nearly 11 percent of California's total economic output is from the entire housing industry, ranking it first among the state's leading output industries. Even after the downturn the industry's economic output outpaces wholesale and retail trade; professional scientific and technical services and information.

While the output contributes to all counties, benefits are highest in the largest regions, including Los Angeles, Orange and San Diego Counties.

The study was designed to reveal the significance of the housing industry on two levels:

• The full range of economic impacts of new housing construction, including support industries and consumption of expenditures generated through the multiplier or ripple effect.

• The still greater significance of the entire housing industry including residential real estate, financing, maintenance and repair, additions and alterations, construction, homeowner expenditures, property manage and all other aspects of the entire stock of owner- and renter-occupied housing.

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