Economic Expansion Reaches Milestone

Housing’s contribution to longevity of economic growth

By Frank Nothaft Housing Affordability, Real Estate

Economists have measured business cycles dating back 165 years in America, and none have lasted more than a decade.  That is, until the current expansion.  The economic recovery that began mid-2009 set a longevity record as it entered July 2019, and the recovery is expected to continue at least into next year.  During this period the economy set other milestones as well: Nonfarm private-sector payroll employment through September has grown for 115 consecutive months, also the longest string of employment growth recorded for the U.S.

During the last nine years the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence. As we found in The CoreLogic Special Report: The Role of Housing in the Longest Economic Expansion, these economic forces have driven a recovery in home construction, prices and equity.

Figure 1

Residential building and contractor jobs are up by nearly one million from the trough in January 2011, accounting for about 5% of private nonfarm employment gains. (Figure 1) The increase would have been even greater if builders could fill all the job openings that they have.  Job openings in construction are the highest since records began to be kept in 2000 and would have added further to employment totals if companies could find workers to hire.

Figure 2

Home prices have rebounded from their trough in all metros.  The CoreLogic Home Price Index for the U.S. has recorded a 59% increase in prices since January 2011. (Figure 2) The rise in prices has been the key ingredient in the recovery in home-equity wealth.  In turn, higher levels of wealth add to consumer purchases. 

Exhibit 3

The CoreLogic Home Equity Report has documented the rise in wealth per homeowner: Between the first quarter of 2011 and the second quarter of 2019, the average equity per borrower increased from $75,000 to $176,000 and rose $5,000 in the past year alone. (Figure 3) Aggregated across all homeowners, home-equity wealth has increased by $10 trillion since 2011 and stands at a record $18.7 trillion as of mid-2019.[1] This gain in home-equity wealth has supported an additional $200 billion in consumer expenditures over this period, helping to sustain the economic expansion’s longevity.[2]

[1] While income and wealth have risen during the expansion, the gains have not been shared equally across all households.  Between 2010 and 2018 the Census Bureau has reported that income inequality had worsened (American Community Survey Table B19083; Gini index for 2010 was 0.469 and for 2018 was 0.485) and that the homeownership gap between White and Black households had increased (Housing Vacancy Survey; non-Hispanic White-Black homeownership gap increased from 28.5 to 30.1 percentage points between 2010 and 2018)

[2] Mark Zandi, Brian Poi, and Scott Hoyt, Wealth Matters (A Lot), Moody’s Analytics, October 2015.  The authors estimated that each additional dollar of home-equity wealth added two cents to consumer expenditures during the economic expansion; thus, a $10 trillion increase in wealth adds $200 billion to spending.

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