Home Sales Contribute to a Healthy Alabama Economy
June 17, 2022
If you sold a home in Alabama in 2021, thank you. A typical home sale had a total economic impact of $79,400, according to the National Association of Realtors®(NAR). All totaled, the real estate industry in Alabama accounted for $39 billion, or 15.8 percent, of Alabama’s gross state product in 2021. That’s up from $33.8 billion in 2020.
Here’s a breakdown of the dollar impact of a typical 2021 home sale in Alabama:
$21,623, or 27.2 percent, of total impact is income from real estate industries. This includes commissions, fees, moving expenses and other items directly relating to buying a home. The total accounts for about 9 percent of the median home price.
$5,000, or 6.3 percent, represents expenditures related to a home purchase like buying furniture and appliances and remodeling, according to the National Association of Home Builders. Those expenditures support businesses, create jobs and, through taxes on purchases, fund state, county and municipal governments and make their way back to the purchaser in the form of schools, parks and services.
$12,779, or 16.1 percent, is the multiplier effect of housing-related expenditures. The multiplier effect allows for the income earned in other economic sectors, after a home sells, that is recirculated into the economy. Restaurants, retailers, and service providers all benefit from real estate sales as more income allows customers to spend more. Consumer spending then contributes to economic growth, employment and income.
$40,042, or 50.4 percent, is generated by new home construction resulting from existing home sales. According to NAR, one new home is constructed as a result of the sale of six existing homes. “Real estate construction is labor-intensive and a major force in job creation,” says personal finance website The Balance. Alabama currently has one of the nation’s lowest unemployment rates at 2.8 percent.
Clearly, in Alabama and across America, real estate is more than a profession or a service or even an industry. Real estate is essential to the state’s economic wellness and growth and every year the numbers prove it.