More great news in the housing market.

In my market research I came across this article and I am pretty sure it hits home:

Article on Housing Construction Starts

As I read this article, I thought to myself about the construction sites that I have seen popping up around Amherst and the Pioneer Valley. Sometimes I think that we live in a unique area and when I see that the trends are on a national level it brings me great confidence that we are heading in the right direction. It is great to see positive news about housing, and another interesting bit that stood out to me in the article was the fact that each new home built, adds 3 jobs annually.

Take a chance to read the article, and let me know what you think.

4 Comments

  • mike letourneau says:

    hey tom,
    that is great news to hear that about our housing market. my only thing with it is some of the numbers do not make sense. it says that the houses are being built at a rate of 872,000. I am assuming that is how many would be built in one year at the rate they broke ground in September. It also states that each house that breaks ground creates 3 jobs for that year. so that would be a total of just over 2.6 million jobs for the year or 218,000 per month. which sounds amazing but the reality of that is its just a revolving number because every year that many jobs are being lost. So overall its great that the housing market is coming back but to say that jobs are coming back at that fast of a rate seems a bit overstated. Yes jobs are being created but only at a rate approx a tenth of what it seems like in the article. They are only being created by the 11 percent increase in housing production.

    either way a good read
    thanks tom. that had much more value than watching dirty jobs, or family guy.

    • Tom Crossman says:

      Hi Mike,

      I think the number 3 jobs is referring to the fact that it takes an equivalent of 3 workers to build a house, and yes it is a revolving number. The 3 people who lay the forms to pour the foundation will not be the same 3 people working on the roof or finishing the trim work.

      I don’t think your number is that far off when you talk about 2.6 million jobs a year in construction. You might be misunderstanding the growth in the housing start rate, if it went up to an annualized rate of 872,000 from 758,000 that is a difference of 114,000 annual starts. Divide that number by 12, (the monthly rate of change) and multiply that number by 3 which is the three jobs added, and you have 28,500 new jobs created in that month as a result of the 15% growth. Consider a few things to go along with that, some people will work more hours before hiring new people. Some people will stretch out the deadlines to keep themselves busy. But never the less, these are positive signs.

      I hope those numbers made sense, and you understand that these types of numbers are never exact. They are rough numbers but the thing that remains true is that there is growth in the right direction. You can see the number of jobs that could have “potentially” been gained as a result of the housing starts number. This is just one sector of the entire economy and to demonstrate that there is room for just under 30,000 jobs is a good thing in my book.

      I hope some of that made sense, if not, let me know and I can try again.

      • mike letourneau says:

        i agree with you 100 percent tom. you put numbers to my words. i was just saying that the article makes it appear alot more jobs are being created then the actual rate which is the numbers you mentioned. I agree 110 percent that any new job is a good job. hopefully the market can continue to go in the direction it is going and our economy gets back on the right track again which it is slowly doing.

        here is a brain exerciser for you. the whole housing market in general. why is it that you build a house out of materials that deteriorate over time it historically increases in value?
        logically that makes no sense. yet the entire market is based on personal value of property and there desire to make more then they paid for it. Yes you can say that its for the demand of the land as our population is ever increasing. this does account for some of it. if it were strictly the value of the land that drove the increase in price a foreclosure being sold down the street would not change the value of a different piece of land.

        just something to think about.
        especially the way that emotions effect the value of an item. i saw a documentary a while back that a professor who is a nation known economist that took a group of college students and showed them a plastic water bottle. he had them all write down a top price that they would pay to buy it. the average price was 8 dollars. he then gave each of them a water bottle for free. a week later he had them all write down the lowest price they would sell it for. the average price was 12 dollars. showing that someone changes there value of an item through attachment to that item and there desire to make a few dollars in the process.

        • Tom Crossman says:

          Mike,

          Job growth is great, no matter what the number. I will certainly be toasting to the housing market when we get back to 1.5 million housing starts at an annual rate.

          It is the expense of building a house that increases over time, not necessarily the house itself. You can also consider the replacement costs. There is also this great psychologist named Gestalt who can tell you that, “The whole is greater than the sum of the parts”. With that in mind, if you have a functional house that was put together years ago, yes the actual parts of the house are deteriorating. However, when the parts work together to provide shelter, there is more value than the individual parts. The labor cost to put them together is more expensive today.

          Feeding off of the topic of the value of the house increasing; replacement costs continue to push the value of the house up. The house that cost $100,000 to make, including materials in labor, 7-10 years later might cost $200,000 to make or more. So it cost $100,000 years ago, why is it so much more today? Although the materials have been aging, there is value to be had.

          To see the difference, take a look at homes on the market today that were built 40+ years ago, and compare the value to new homes on the market that were built within the last 5 years. They will have comparable specs like bedrooms, bathrooms etc. but the new materials they put into the house and the new labor that goes into it makes it more expensive to have. Believe me, the new stuff is more valuable anyway.

          In other words, the house does deteriorate in value with the deterioration of the materials used to build it. Remember that $100,000 house that we built 7-10 years ago, it is now worth $150,000. The value has gone up $50,000 over that time period, but if it were built new it would cost $200,000. Is this making sense yet?

          I do like the example that you gave about the Water Bottle, I think it is a good exercise to demonstrate to the class the emotional connection people have to items.

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