Chicago Real Estate Sales Directly — and Indirectly — Fuel Our Economy

July 06, 2011

Ever wonder what kind of impact the sale of a home makes in Illinois?

According to the Illinois Association of REALTORS (IAR), the expenditures made by buyers and sellers during the sale of an existing home do more for our state’s economy than you might think.

The IAR ran a study that analyzed typical expenses on both sides of a residential real estate transaction when someone buys or sells a home.

According to the study, which was conducted by Chicago-based RCF Economic and Financial Consulting, the amount of direct expenditures per home sale in Illinois is $28,581. When considering all home sales in the state, that comes out to $3.2 billion in annual expenditures.

What are expenditures? Well, the home seller must prepare the home for sale and might pay for repairs and improvements before putting it on the market. A home buyer often spends money after they buy the home on remodeling and new furnishings.

Both sides generally hire service professionals including attorneys, real estate professionals, home inspectors and appraisers. Money also goes to the title company and local, county and state government taxing agencies.

So, when you include related industries like movers and warehousing, the retail trade and financial services, it turns out that more than $7.9 billion is being spent in direct and indirect expenditures in Illinois each year through existing home sales.

“In addition to the direct expenses there are substantial economic ripple effects when a single home is bought or sold,” says REALTOR® Sheryl Grider Whitehurst ABR, CRB, GRI, president of the Illinois Association of REALTORS®.

“If the buyer purchases paint from a hardware store or moving services, for example, the hardware store and moving firm will have expenses of their own such as labor and delivery. These are just two examples to illustrate how the real estate industry affects many other industries and generates jobs, wages and salaries adding up to an economic impact that exceeds $7.9 billion annually in the state of Illinois.”

RCF analyzed Illinois home sales for a 12-month period from the fourth quarter of 2009 through the third quarter of 2010. The researchers got expenditure data from 415 Illinois home buyers and sellers that were surveyed during that time, as well as a information from title companies, research reports and more.

An input-output model developed by economists from the University of Illinois Regional Economics Applications Laboratory (REAL) was used to determine how money spent in one industry is paid to other industries, which in turn is spent in other industries.

The end result is a multiplier effect on the economy of $4.7 billion in indirect expenditures from annual Illinois home sales.

“The research really underscores the importance of the housing market on the health of the overall Illinois economy. If there are fewer home sales in a given year, there will be an impact across many related industries and the economy,” said Whitehurst.

“While the Illinois employment picture has shown some improvement in recent months, significantly stronger private sector job growth and improved consumer confidence are paramount to a housing market recovery.”

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