In the current uncertain environment, it is more important than ever that we as an industry communicate the critical role housing plays in the U.S. economy. I am probably biased, since I am a researcher, but I believe there needs to be more data-backed, evidence-based analysis to help cut through some of the misconceptions and misunderstandings about the housing market.
The housing industry is a vital part of the U.S. economy. The United States is the largest economy in the world, with gross domestic product (GDP) of more than $28 trillion. Housing accounts for between 15% and 18% of GDP through economic activity associated with the construction of new housing, remodeling of existing housing, services provided during the home-buying and selling process and spending on housing services, like rent and utilities. In the fourth quarter of 2023, the housing component of the economy totaled $4.5 trillion—more than just about any other sector, including health care, transportation and energy.
Specifically on the for-sale side of the housing market, each home sale generates economic activity, adding to state and local economies. According to estimates from 2022, across the U.S., each home sale resulted in an economic impact of $113,200 resulting from expenditures related to the home purchase, new construction activity and income generated from real estate industries.
Homeownership is the primary way in which Americans generate wealth. More so than any other country, homeownership is at the heart of American culture and opportunity. Homeownership is also how families—particularly middle-class families—accumulate wealth to pass on to the next generation.
According to the Federal Reserve, the median net worth of a U.S. homeowner is $366,200, or nearly 40 times the net worth of the typical household who rents. Homeowners with a mortgage saw their total housing equity increase by more than one trillion dollars between the third quarter of 2022 and the third quarter of 2023.
Despite the proliferation of online real estate portals, homebuyers and sellers highly value the knowledge and expertise of a real estate professional. In a nationwide consumer focus group, Bright MLS found that the vast majority of consumers say it would be “very stressful” to navigate the home-buying process without an agent or broker.
The recent narrative around litigation and the National Association of REALTORS® proposed settlement has generated misleading, and sometimes simply incorrect, narrative around agents, brokers, commissions and multiple listings services. To help add clarity to the conversation and to dispel some oft-repeated myths about the industry, Bright MLS conducted new research to shed light on how the housing market and residential real estate transactions actually work. According to an analysis of more than one million home sales taking place over four years, we used data and research to counter two misconceptions. First, our research showed that the blanket offer of buyer agent compensation does not lead agents to “steer” clients to properties with higher compensation offers. Second, our research showed that real estate commissions do not lead to higher home prices.
There are still a lot of questions that need to be answered about the housing market. Millions of Americans will still be looking to buy a home this year. More research—presented in a way that is easy to communicate—will be essential for helping to reduce buyer and seller confusion and to cut through hyperbolic and distorted headlines.
For more information, visit https://www.brightmls.com/.
