Summary of Factors and my Belief of what is going to Happen
Most economists according to the article have given pessimistic forecasts as far as economic growth is concerned. In line with the lowered forecasts, the Obama administration has formulated several policies to address the issue and spur growth. Sluggish economic growth according to the author is largely attributable to housing and unemployment problems (Mckinnon 1). I am going to analyze the aforementioned factors in the summary and in addition give their impacts on the local real estate market.
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Summary of the factors expected to drive the real estate market
According to the article, the government is looking into revamping growth by addressing unemployment and taxation issues (Mckinnon 1). These two vital factors largely affect real estate markets. When the government changes its public policy in relation to taxes, for example, the incentive will be a plus to the middle-class population who are in employment already. Their disposable income will relatively increase, extra dollars will aggravate the urge to spend more and improve their standard of living. These individuals will be attracted to spend on the acquisition of new houses leading to an increase in the real estate market.
The writer moreover has largely identified unemployment as a mega problem in the USA. The unemployment figures according to the Wall Street article stand at an alarming 9.1% (Mckinnon 2). This figure is a wake-up call to not only the government policy markers but also the private sector economists as well. Given the government formulated a policy in relation to job creation sails through, many individuals will have their way into employment.
This increased number of persons employed will increase the demand for not only more housing units but also increased office space. Firms will expand and acquire more estates to provide office space and increase operations units for the added staff. In addition, increased employment will in the long run increase the population. As the welfare of citizens increases and standards of living improves, humans will tend to add an extra child because they have enough economic muscle to sustain the added member. This increase in population will increase the real estate market as the demand for houses will increases.
Factor impact on the real estate market
The real estate market is paramount in the realization of improved economic growth in both the long and short term. In the short term, public policy changes i.e. the reduction of taxes in accordance with the article will increase the real estate market. The middle-class demand for a better house will be an immediate effect because of a boost in their disposable income. Moreover, with created job opportunities, employment and population growth will consequently increase. These increases will call for demand in increased housing units to cater to their needs; this will increase the real estate market demand.
With the increased demand for real estate by both individuals and firms, many investors will be attracted to the sector. The demand in the short run will be higher than the supply, increasing the equilibrium price. However, given the increased number of investors, the equilibrium prices will stagnate at some point because the demand will be relatively equal to the supply. The development of new housing units is expected to open new employment opportunities for individuals. This working population will moreover provide a ready market for the goods and services produced by local firms; hence addressing the issue of minimal export demand.
Mckinnon, John D. “White House downshifts on jobs, growth.” The Wall Street Journal, 2011. Print.
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