Home Building Industry Essay Example

estate market has caused an increase in competition among builders. They now compete on various factors including location, reputation, quality, design, and amenities. Builders can finance their operations by obtaining credit from commercial banks, using their inventory homes as collateral. Larger firms have an advantage in this market as they can secure more financing compared to smaller firms. The housing market is divided based on people's preferences, race, family status, location, income level, and age. Both residential and non-residential sectors exist within the real estate industry; however, the residential sector holds a more dominant position. Fiscal policies that affect the real estate sector can influence either the cost or return on capital.

The development of a real estate property can be hindered in one area due to land use regulation and zoning restrictions, while it may be encouraged in another area. Variations in property taxes impact the profitability of a real estate firm, as they result in higher costs that are passed on to consumers through increased prices. Consequently, when prices rise and all other factors remain constant, such as incomes, the demand for houses decreases.

Lower property taxes will have the opposite effect and decrease construction costs, which will make the industry more attractive to consumers. In order to encourage the growth of non-residential housing, temporary tax credits can be introduced, providing additional benefits for commercial or industrial construction (Michael B, Colin L and Bryan M, 1998). A stable financial environment is extremely important as it allows all parties involved to plan ahead. The current surplus of unsold homes in relation to sales and price trends suggests an excess supply compared to demand.

Potential buyers may delay

their purchases, anticipating future price reductions. In the real estate industry, property demand is affected by prices, resulting in a relatively elastic demand. Conversely, price elasticity of supply pertains to how product supply reacts to its price.

Paul Emrath (2005) states that the supply of real estate is impacted by various costs including land, labor, electricity, and building materials such as cement. When these factors become more costly, the supply decreases, leading to an increase in consumer prices. Conversely, housing demand is influenced by demographic factors like population size and growth. A larger population necessitates more housing. However, it is important to consider other elements such as immigration rates, divorce rates, and marriage rates. It should be noted that providing housing takes time and the supply may not immediately respond. Therefore, an increase in demand may not be immediately accommodated.

The real estate sector is heavily influenced by government monetary policies. The Federal Reserve board holds the authority to control interest rates, which has a direct impact on funds provided to commercial banks. Consequently, both industry consumers and producers experience adverse effects. The limited availability of loans can prevent prospective buyers from obtaining financing, resulting in a decline in home purchases. Similarly, producers may encounter financial restrictions that impede their growth efforts.

The Federal Housing Association and other government agencies possess the authority to affect lenders' mortgage funding. Moreover, the federal government can influence the quantity and value of land in specific areas by increasing or decreasing it. High federal taxes can impede investment in the real estate industry. Income plays a role in determining the type of housing one can choose, with employment and wage levels also

playing significant roles in affecting the real estate industry.

The decrease in job opportunities and wages has caused a decline in demand for real estate. In the real estate industry, consumer confidence is crucial and depends on factors like inflation rates and mortgage availability. A stable economy fosters consumer confidence, enabling individuals to make future plans.

The U. S federal government has already lowered interest rates in an effort to decrease inflation and stimulate the real estate industry. The depreciation of the U. S dollar in global markets significantly impacts people's confidence, leading to a decline in investment in real estate (Steve Schifferes, 2007). A successful real estate industry has positive externalities for the U.

The US economy plays a crucial role in shaping the real estate industry, affecting both its industrial and service sectors. These sectors encompass various activities like mortgage banking, brokerage services, design and property management, and cement manufacturing. The success of the real estate industry is heavily influenced by government regulations and taxation practices that can either promote or enhance the industry. In addition to this, it is important for the federal government to enhance court systems to ensure proper enforcement of contracts. It should be noted that some mortgage firms have been forced to close down due to flawed underwriting procedures resulting in inappropriate mortgages for buyers.

The federal government has the capability to address these issues (Richard G. Lipsey, 1997). A flourishing economy is distinguished by elevated levels of GDP, employment, and income per capita. Consequently, the real estate sector flourishes as individuals possess the financial resources to fulfill their housing requirements. A steady economy with prospects for future expansion acts as an

incentive for investments. The devaluation of the US dollar can be attributed to diverse factors, including its international perception.

David L. (2004) suggests that in order to avoid an economic crisis, the federal government should manage inflation by adjusting spending according to the current economic situation. Moreover, it is crucial for the government to discourage monopolistic companies from exploiting their market power and ensure affordable energy prices. Additionally, a successful strategy involves assisting home lending by acquiring mortgages from lenders and selling them as securities to investors.

Problems in mortgage financing have caused lenders to be unable to replace funds, resulting in defaults and foreclosures on buildings. Wage inequalities affect the real estate industry, with higher wage earners being able to afford better housing compared to those with lower wages. Rising interest rates have a negative impact on the home building industry. Conversely, an economy that favors minimal inflation, accessible credit, and low interest rates benefits the real estate industry by increasing consumer demand (Sami Abdella, 1972). Land is a vital component of this industry.

Land is both immobile and scarce, leading to high prices in areas with limited supply and high demand. Homebuilders capitalize on this by raising their prices. Limited availability of developable land results in shortages. Local governments intervene by regulating land control to promote growth, which can restrict land for home building. Immigration to the US also contributes to a potential increase in housing demand due to population growth.

Immigrants come to the US attracted by its strong economy and often look for new homes upon arrival. The home building industry, which includes professionals such as lawyers, architects, real estate agents, and lenders, contributes to

the government's revenue. The industry's performance is affected by house prices, and declining prices are not profitable for investors. Since 2006, house prices have been decreasing, leading to a slump in the housing market.

References:

1. William Poole. 2007. Real Estate in the U. S. Economy.
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Housing meltdown hits US economy.
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li stm Richard G. Lipsey. 1997. Macroeconomic Theory and Policy.

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Macroeconomics.