VOL. 125 | NO. 56 | Tuesday, March 23, 2010
NAHB Economist Touts Homebuilding’s Reach
By Eric Smith
Elliot Eisenberg, chief economist for the National Association of Home Builders, said he was instructed to make sure last week’s speech to local builders, real estate agents and elected officials was “fun” – never an easy task when discussing today’s housing market.
“I’m going to have to lie from time to time,” he said, eliciting laughter from the crowd.
Eisenberg, in town courtesy of the Memphis Area Home Builders Association, spent an hour detailing the economic impact homebuilding in Shelby County has on the metropolitan area.
He used the latest data from NAHB’s housing policy department, which recently released an assessment of the income, jobs and taxes generated from local homebuilding activity in 2006 and 2008.
In Eisenberg’s words, the “economy fell off a cliff” a year and a half ago, wreaking havoc on the homebuilding industry.
Shelby County builders filed just 529 new home permits last year, a 43.7 percent decline from 940 permits in 2008 and a staggering 80 percent decline from 2,643 permits in 2007, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.
Eisenberg’s speech centered on an NAHB model that estimates the impact of single-family homebuilding.
He looked specifically at Shelby County’s outstanding performance in 2006, a year that saw 4,259 starts, and 2008, a year that saw only 842 starts (using MAHBA data).
Eisenberg said the economic impact of single-family homebuilding can be spilt into three phases – construction, ripple effect and occupancy.
The construction phase includes the actual building of the home, from the immediate jobs it creates to the materials used to the taxes and fees generated.
The ripple-effect phase includes short-term benefits following the construction phase and includes the spending that results from a home being sold. That means everyone from the workers who benefited from their paychecks to the homeowners who must furnish their new residence.
And the last phase, the occupancy phase, includes the long-term impact of homeowners living in their homes and spending money on the properties for years afterward.
The 4,259 homes built in Shelby County in 2006 created a one-year economic impact of $839.9 million in local income, $100.1 million in local taxes and 13,011 local jobs, according to the NAHB model.
The annually recurring impacts were – and continue to be – $116.2 million in local income, $43.8 million in local taxes and 2,033 local jobs.
In contrast, the 842 homes built in Shelby County in 2008 created a one-year economic impact of $170 million in local income, $20.2 million in local taxes and 2,521 local jobs, according to the NAHB model.
The annually recurring impacts are $23.7 million in local income, $8.9 million in local taxes and 397 local jobs.
“When home construction is doing well for itself, it creates lots of other jobs in other sectors of the economy because of large effects of multipliers (e.g., suppliers),” Eisenberg said.
In 2006, the homebuilding industry accounted for about 9,000 jobs in the Memphis metropolitan area, ranging from general contractors to subcontractors to all the professional services (such as real estate attorneys) needed to get homes built.
If all homebuilding employees worked for a single company, that entity would have been second only to FedEx (more than 30,000) and ahead of numerous hospitals for the largest local work force.
While Eisenberg said these numbers don’t mean builders should start building right away, they do reveal the importance of single-family construction to the overall economy.
“We’re big,” he said. “Homebuilding is a very large sector of the economy. It does a lot to drive the health of the economy.”