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As Housing Recovers, Lots Of Boats Rise In U.S. Economy

Toll Brothers luxury homes are shown sold before construction is completed in Oceanside, Calif. On Wednesday, Toll Brothers reported a 24 percent jump in quarterly revenue due to higher home prices.
Mike Blake
Reuters /Landov
Toll Brothers luxury homes are shown sold before construction is completed in Oceanside, Calif. On Wednesday, Toll Brothers reported a 24 percent jump in quarterly revenue due to higher home prices.

In just the past week we've seen a bunch of signs that the housing recovery is gaining steam. Data out Wednesday showed that existing-home sales rose to their highest level in nearly four years, while prices were up 14 percent from a year ago.

Retailers Home Depot and Lowe's both reported strong earnings growth and attributed that to the housing rebound.

And most important for the economy, homebuilders are hiring more workers and building more houses.

At the Cataumet Sawmill in Falmouth, Mass., Tom Adams is watching the power of the housing market comeback firsthand. His mill makes floorboards out of reclaimed wood. Like 100-year-old beams that came out of a shoe factory when it was torn down.

A 4-foot-high spinning saw blade slices the timbers into boards, which have the rich golden color of old-growth pine.

"You can see after we take the first cut off with the dark wood and everything ... when you get into it ... it's beautiful stuff," says Adams.

Beautiful, but after the housing crash there was a lot less demand. Not many new homes were getting built. But now that's changed.

Nationally, builders are starting construction on 20 percent more homes than a year ago. Adams' says that's good news for his sawmill, where he'd had to reduce his workers' hours.

"They were down to 36 hours at the low point in the economy," says Adams. "This year, they're back up to 45 hours a week. So there's a lot more smiles on faces than there were a few years ago."

This is why housing can play such a powerful role in an economic recovery. As Americans buy more new houses, that's a lot of money getting spent on each house. But also, economists say that money has what's called a big "multiplier." That's because most of the materials and all the labor are domestic. So most of that money flows back into American workers' pockets.

Those workers can then go and spend money. And that helps create a chain reaction of growth in the economy

"I'm building a deck, buyin' motorcycles, doing whatever I can to help," says Josh Griffiths, who runs the big 40-inch saw blade in the mill.

Across the mill yard, Vincent Pena says he too is enjoying a bigger paycheck. "It's a good feeling," he says. "Come to work in a better mood and work hard and you're excited you got jobs to do. ... You know, cover everything and still have a little extra to go out on Friday night if you want to."

Bill Wheaton, a housing economist at the Massachusetts Institute of Technology, calls increased homebuilding "one of the important things that's been missing from this recovery."

Wheaton says the construction trades have seen a 7 percent increase in jobs over the past 18 months, but that's still modest when it comes to the kind of bounce-back normally seen in housing recoveries.

Wheaton says, though, there's a lot more where that came from. He explains that this downturn in housing was remarkably long: Housing starts stayed down near 50-year lows for year after year.

So now with the supply of homes tight again, the bounce-back, Wheaton says, will be longer too. In fact, he thinks the housing market could add a full percentage point of growth to GDP for the next three or four years, pulling the sluggish recovery out of the doldrums.

And there are signs that the housing rebound is gaining traction. Toll Brothers, one of the biggest homebuilding companies in the country, announced strong earnings Wednesday.

Still, some economists aren't so bullish about housing. And some worry that rising interest rates could derail the comeback.

Copyright 2021 NPR. To see more, visit https://www.npr.org.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.
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