A Message from the President with Mike Theo: The Ripple Effect


 July 03, 2013
MikeTheoLRG

Visualize a real estate closing, where John and Jane try to steady their slightly trembling hand to sign the documents buying their first home. It‚Äôs a magical moment for them but also for their REALTOR¬ģ, who guided them through an increasingly complex process marked by equal amounts of excitement and stress. And in the end, everyone is fulfilled.

Now visualize this moment happening hundreds, and thousands, of times across Wisconsin and across the country. The positive impact of buying a home is felt not just by the buyers and sellers and REALTORS¬ģ, but of everyone involved in the transaction including appraisers, bankers, title insurers, inspectors, movers and many more.¬†

And now, zoom out further and take an even bigger look at the impact of that transaction ‚ÄĒ not just to those directly involved ‚ÄĒ but the larger economic impact on related businesses from construction to financing to supplies to furnishings to home fixtures to lawn care and all the related purchases that support or follow that single closing.¬†

And if you pull back even further and consider the impact that transaction has on the social fabric of a community, its schools, amenities, parks, roads, police and fire protection, garbage collection, and other essential services that add to the quality of life for not just those directly involved in the transaction, but for all their neighbors, you can see why real estate is truly the most significant driver of economic growth and general well-being. The ripple effect of those signatures by John and Jane at that closing will be felt throughout the community and throughout the economy. 

While John and Jane aren’t thinking about the broader social and economic benefits of their new home purchase, policymakers should. This is the story we need to tell to anyone who will listen during these important times, when real estate markets are making significant gains at precisely the time that national and state policymakers are considering significant changes in tax and budget policies.

A strong real estate sector is a critical component of economies at all levels. A strong housing market helps fuel macroeconomic growth and, as we’ve seen all too painfully in recent years, a weakened housing market can bring an entire national economy to its knees. 

Several years ago, the WRA commissioned a study of the prominent role that housing plays in Wisconsin’s economy and the overall quality of life of our residents.* Lawmakers, regulators and the general public would benefit greatly by understanding some of the key findings from that study, including:

  • Real estate constitutes the second largest industry sector in Wisconsin, accounting for 11 percent of the gross domestic product (GDP). Separately, construction accounted for an additional 3.4 percent of state GDP.
  • Employment in real estate averaged approximately 20,000 jobs with total compensation of $757 million.
  • Every $1 million in real estate sector spending generated over $440,000 in economy output in other economic sectors.
  • Revenues to local governments from property taxes totaled over $8 billion, accounting for over 95 percent of all local governmental revenues.
  • Homeownership rates in Wisconsin were consistently higher than the national average at over 70 percent.¬†
  • Homeownership constitutes a substantial portion of the wealth of state residents and is a good investment. Median home prices rose over 79 percent over the decade of the 1990s and increased 162 percent between 1990 and 2006 ‚ÄĒ far outpacing the rate of inflation during both periods.
  • Household wealth more than tripled from $76 billion in 1990 to $260 billion in 2006.

In addition to these tangible economic benefits, there are numerous social benefits to homeownership, including more stable neighborhoods, better performing schools, stronger ties to community involvement and improved outcomes for families.
John and Jane were probably thinking more about their moving boxes and the excitement of settling into their new home than they were about the economic, social and community impact when they affixed that somewhat wobbly signature to those closing documents.

But as individual REALTORS¬ģ and as an association, we must not only share in the joy of this one couple ‚ÄĒ we must educate policymakers and the general public that homeownership should be viewed as more than just a potential source of tax revenue to balance out-of-whack government budgets. We must show that real estate and housing represent the single greatest engine for economic stimulus, community and family cohesiveness, and our desired quality of life. Homeownership should be encouraged through our tax code, our regulatory policies and our family values. If we‚Äôre successful, the positive ripple effect of a strong real estate market will be felt throughout society.

*‚ÄúThe Importance of the Real Estate Industry for the Wisconsin Economy‚ÄĚ study conducted by C3 Statistical Solutions, Drs. David E. Clark and Steven E. Crane, principle investigators. Visualize a real estate closing, where John and Jane try to steady their slightly trembling hand to sign the documents buying their first home. It‚Äôs a magical moment for them but also for their REALTOR¬ģ, who guided them through an increasingly complex process marked by equal amounts of excitement and stress. And in the end, everyone is fulfilled.

Now visualize this moment happening hundreds, and thousands, of times across Wisconsin and across the country. The positive impact of buying a home is felt not just by the buyers and sellers and REALTORS¬ģ, but of everyone involved in the transaction including appraisers, bankers, title insurers, inspectors, movers and many more.¬†

And now, zoom out further and take an even bigger look at the impact of that transaction ‚ÄĒ not just to those directly involved ‚ÄĒ but the larger economic impact on related businesses from construction to financing to supplies to furnishings to home fixtures to lawn care and all the related purchases that support or follow that single closing.¬†

And if you pull back even further and consider the impact that transaction has on the social fabric of a community, its schools, amenities, parks, roads, police and fire protection, garbage collection, and other essential services that add to the quality of life for not just those directly involved in the transaction, but for all their neighbors, you can see why real estate is truly the most significant driver of economic growth and general well-being. The ripple effect of those signatures by John and Jane at that closing will be felt throughout the community and throughout the economy. 

While John and Jane aren’t thinking about the broader social and economic benefits of their new home purchase, policymakers should. This is the story we need to tell to anyone who will listen during these important times, when real estate markets are making significant gains at precisely the time that national and state policymakers are considering significant changes in tax and budget policies. 

A strong real estate sector is a critical component of economies at all levels. A strong housing market helps fuel macroeconomic growth and, as we’ve seen all too painfully in recent years, a weakened housing market can bring an entire national economy to its knees. 

Several years ago, the WRA commissioned a study of the prominent role that housing plays in Wisconsin’s economy and the overall quality of life of our residents.* Lawmakers, regulators and the general public would benefit greatly by understanding some of the key findings from that study, including:

  • Real estate constitutes the second largest industry sector in Wisconsin, accounting for 11 percent of the gross domestic product (GDP). Separately, construction accounted for an additional 3.4 percent of state GDP.
  • Employment in real estate averaged approximately 20,000 jobs with total compensation of $757 million.
  • Every $1 million in real estate sector spending generated over $440,000 in economy output in other economic sectors.
  • Revenues to local governments from property taxes totaled over $8 billion, accounting for over 95 percent of all local governmental revenues.
  • Homeownership rates in Wisconsin were consistently higher than the national average at over 70 percent.¬†
  • Homeownership constitutes a substantial portion of the wealth of state residents and is a good investment. Median home prices rose over 79 percent over the decade of the 1990s and increased 162 percent between 1990 and 2006 ‚ÄĒ far outpacing the rate of inflation during both periods.
  • Household wealth more than tripled from $76 billion in 1990 to $260 billion in 2006.

In addition to these tangible economic benefits, there are numerous social benefits to homeownership, including more stable neighborhoods, better performing schools, stronger ties to community involvement and improved outcomes for families.
John and Jane were probably thinking more about their moving boxes and the excitement of settling into their new home than they were about the economic, social and community impact when they affixed that somewhat wobbly signature to those closing documents.

But as individual REALTORS¬ģ and as an association, we must not only share in the joy of this one couple ‚ÄĒ we must educate policymakers and the general public that homeownership should be viewed as more than just a potential source of tax revenue to balance out-of-whack government budgets. We must show that real estate and housing represent the single greatest engine for economic stimulus, community and family cohesiveness, and our desired quality of life. Homeownership should be encouraged through our tax code, our regulatory policies and our family values. If we‚Äôre successful, the positive ripple effect of a strong real estate market will be felt throughout society.

*‚ÄúThe Importance of the Real Estate Industry for the Wisconsin Economy‚ÄĚ study conducted by C3 Statistical Solutions, Drs. David E. Clark and Steven E. Crane, principle investigators.

Copyright 1998 - 2020 Wisconsin REALTORS¬ģ Association. All rights reserved.

Privacy Policy   |   Terms of Use   |   Accessibility   |   Real Estate Continuing Education