From the course: Economics for Everyone: Understanding a Recession

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Home sales

Home sales

From the course: Economics for Everyone: Understanding a Recession

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Home sales

- There are two big reasons why housing is important for the economy. On the one hand, new home sales. Those count towards GDP. They're part of economic growth. More new homes that get built, bigger GDP is going to be. But if housing construction stops and new home sales fall, that's not good for overall economic growth. The second big reason that housing's important is that home sales and home prices impact how wealthy consumers feel. If home sales are strong, housing is good, people's home prices are up, people feel wealthier. They're willing to spend more money. But when home prices fall, like during the great recession 2007 to 2009, people felt less wealthy. Their largest asset, for most people, suddenly lost its value. And that made people less willing to spend, less willing to consume. And that's really important because 70% of the economy is people buying stuff. If you see your biggest asset lose value, you…

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