Each issue of The Regional Economist, published by the Federal Reserve Bank of St. Louis, features the section “Ask an Economist,” in which one of the Bank’s economists answers a question. The answer below was provided by Research Officer and Economist Carlos Garriga.
There are changes in regard to how people view the purchase of a home. In the past, people had this idea that you should try to buy a house as soon as possible. People had this idea that the price of a house could only go up. Today, people don't want to rush such an important decision, perhaps because of the fear of a decline in prices. Young households, in particular, are more reluctant to get into housing. In general, homeownership might not be a value for young people in the long run; if so, its reputation as a safe investment may be dramatically changing. Indeed, the rate of homeownership in the U.S. has fallen to a level not seen since the 1990s.
Another important effect is that the contribution of the construction sector to the rest of the economy is being reduced. This is more likely a short-term or medium-term effect. Construction is not employing as many people as in the past 10 years, and that has a broader impact on the economy than many people realize. People in the construction sector buy a lot of resources from other sectors. When construction is down, other sectors suffer, and the effects can be quite sizable and enduring.
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Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.