Home Economics
No, not that long lost class from high school…
A landscaper, a piano teacher, an electrician, and nanny all walk into a bar. They sit down and order a drink. What do they all have in common?
Those drinks that they are ordering — they are getting paid for by a dollar generated because of home ownership.
When we think about the economic impact of the US housing market, it stands to reason that we think first and foremost of the buying and selling of property. It’s not a wrong assumption.
Residential real estate transactions are a huge economic driver and directly employ approximately 2 million realtors, home inspectors, title agents, movers, etc.
However, there is a significant, secondary wave of home services and purchases that reverberate across the domestic and foreign economy.
When you own a home, you need stuff to fill it up — cue Wayfarer, Ikea, & Target runs galore. That stuff needs to be made somewhere, sold somewhere, and delivered to you, then oftentimes cleaned and repaired.
Then this home needs to be maintained — opening up massive demand for goods and services. From Clorox to lumber, roof tiles, paper towels, lightbulbs, and window panes. Head outside, now you’re buying grass seed, potted plants, snow shovels, and shutters.
Then because you are a home owner, have a mortgage to pay, and lifestyle to maintain, you work. Opening up demand for services that most home owners choose to outsource, usually due to lack of time, or perhaps, expertise. Your plumbers, painters, landscapers, and handy men. Then the nuts, bolts, tools, service vans, uniforms, and marketing they need.
You get the idea and that’s before we even get to all that insurance.
So, let’s talk about the scale 👇
A home tends to be the single, biggest purchase of a consumer’s life. This is true for almost all Americans — 90% of which finance their home purchase or in layman’s terms “ take out a mortgage”.
Yet, the data above indicates that buying a home is a “gateway purchase” of sorts. Through a combination of necessity, and desire to mimic the influencers of HGTV, homeowners stimulate the economy.
To reverse-engineer this reality, imagine a world without mortgages and mortgage lenders.
Let’s say that the 10% of cash buyers remain and in addition, say, 15% of the other folks band together and get creative around financing.
Let’s apply these new numbers to the chart above (reducing all figures by 75%) to simulate an economy without readily accessible mortgage loans:
All other things the same (yes, this is an oversimplification) as of 2020 this scenario would have the United States forgoing about $3 T in GDP.
For context this is akin to about the entire output of either India, Great Britain, or France. A significant loss.
At Xpanse, we are making mortgages easier and more efficient to facilitate, helping to sustain longterm economic growth.
Long live Target runs.
Xpanse is building the modern OS for the greater mortgage industry that will connect and create value to borrowers, lenders, servicers, and providers. Conquering the last frontier of Fintech #BuiltInSeattle.
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