In many countries, the housing market plays a crucial role in driving economic growth. The US economy has long relied on multiple sectors, such as technology, manufacturing, and retail, to fuel its growth engine. But with rising government debt, stretched spending, and uncertainty in other areas, attention is shifting to housing, which has been a drag on growth in the US since the pandemic.
Housing is more than just homes, it touches everything from construction and real estate services to banking and consumer goods. When the housing market is booming, demand for materials like lumber, cement, and steel skyrockets. Contractors, architects, and real estate agents also benefit, and homebuyers typically spend on new furniture, appliances, and renovations. All of this creates jobs and boosts GDP.
The UK offers an interesting case study in how housing could be a major economic driver. With its strained public finances and limited ability to ramp up government spending, the new Labour government in the UK is now looking to housing as a way to stimulate growth.
The UK, like the US, is facing a significant housing shortage. A lack of affordable homes has driven up prices, leaving many people priced out of the market. This pent-up demand for homes represents an opportunity to build more and stimulate the broader economy.
Housing doesn’t just benefit homebuyers and sellers; it has what economists call a ‘multiplier effect’. For every home built, there is a ripple of activity across different industries. This makes it an attractive option for policymakers aiming to boost economic activity without increasing government spending.
The UK’s new government has recognised that building more homes and making the housing market more accessible could drive growth. Their focus on housing policy includes streamlining planning laws, incentivising developers, and ensuring that infrastructure projects complement new housing initiatives.
Could the U.S. follow a similar path? The signs are there.
Kamala Harris has recently been discussing the potential for housing to play a bigger role in the US economy. The US housing market is massive, and just like in the UK, there’s a significant shortage of affordable homes. According to Freddie Mac, the US is short by 3.8 million housing units. This imbalance between supply and demand presents a similar opportunity to what the UK is now trying to address.
In the ongoing US presidential race, Kamala Harris has mentioned housing as a way to generate sustainable, long-term growth without relying on increased government spending. This is especially appealing at a time when the US national debt is over $33 trillion. In this context, the housing market could be seen as a vital lever to pull.
So, what does this mean for investors? If housing does become a key growth engine, then related stocks and sectors could see significant gains.
Companies that specialise in building residential homes are the most direct beneficiaries of a housing boom. If housing policies are enacted to stimulate more construction, these companies will be at the forefront.
A housing boom means increased demand for building materials too. Companies that produce lumber, cement, steel, and other key components are likely to see increased revenues.
This opportunity is compelling for investors. If housing does become the new growth engine of the US economy in 2025 and beyond, stocks related to homebuilding, construction materials, real estate services, and consumer goods could all benefit. Keeping a close eye on policy announcements and market trends could help you stay ahead of the curve and capitalise on this potential shift.
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