It Takes More than Luck to Be an Informed Real Estate Agent

Mar 17, 2015 10:03:56 AM

Green is not only the color of St. Patrick's Day, it is the color of money. Coincidence? No. It will take more than luck for you to understand what GDP represents and how to talk about this with your clients. Fortunately (pun intended), we have the information you need about GDP so you don't have to rely on luck.

What is GDP and what does it represent?

Gross domestic product (GDP) is generally considered the best indicator of the economy’s health as a whole. It’s often referred to as the “temperature of the economy.” GDP is critical information for investors in all asset classes – including real estate. GDP is calculated by evaluating consumption, investment, government spending and net exports. If GDP is rising, the economy is improving. If GDP is falling or not moving, the economy is getting worse.

Annual GDP grew 2.4 percent in 2014

GDP growth was hampered by weather and a generally slow first quarter; however, things picked up in the final three quarters and 2014 overall was a strong year.

According to the U.S. Bureau of Economic Analysis, the increase in real GDP in 2014 reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Even though we saw growth in 2014, economists like to see GDP above 3 percent, so we hope to see more growth in 2015.

GDP

The aha: Growth should continue in 2015 with the help of lower energy prices

Experts expect to see continued GDP growth in 2015 and even into 2016. With lower energy prices, consumers are spending that money in other industries. In Q4 2014, consumer spending grew at the fastest rate it has in eight years, likely due to lower energy prices. As the unemployment rate decreases, confidence in the economy rises which is also fueling increased consumer spending.

We expect 2015 to be a healthy year for GDP and are enthusiastic about the new buyers expected to make their first purchase this year. While first-time home buyers may have a little more money to spend today, they are probably unfamiliar with the unexpected costs of home ownership and will benefit from your guidance and experience. You can help your clients protect their investment by talking with them about options such as home warranties and good home habits. Real estate relationships can last lifetimes and hopefully one day you will be selling the home you helped them buy.
Market ahas by Keller Williams - Making Industry Experts
In October 2014, Keller Williams initiated a new five part blog series, Market ahas. The quarterly series is designed to help our associates better serve as their clients’ local economists. The topics covered each quarter are mortgage rates, unemployment, price change, inventory, and GDP. This is the fifth article in the series for Q4 2014. Read more Market ahas here!