It is an indisputable fact that market economies, in capitalism, are moved by the supply and demand of goods and services.. Specifically with regard to the Real Estate sector, the basis of the real estate market is the demand by households, companies, governments and institutions for space and shelter to carry out activities. And furthermore, since, according to the National Association of Realtors, the aggregate size of residential real estate markets in the United States, as measured by sales volume, accounted for nearly $57 billion in 2005 alone, the impact of Demand for residential real estate products by households is huge. .
When people earn income, they tend to invest it, and the more people earn income, the more people tend to invest it. Therefore, there is a correlation between capital and employment in real estate or, if you will, between income and labor. An increase in consumption levels implies an increase in prices caused by a corresponding increase in demand, itself generated by a proportional increase in the income-employment factor.
It follows, therefore, that growth stems from the balance of capital and investment with labor and employment. And since, furthermore, production is a direct function of consumer spending, which increases as unemployment decreases, it follows that capital accumulation increases as employment increases and capital accumulation decreases as unemployment decreases. employment decreases. This fact, therefore, highlights the importance of the conditions of domestic labor markets for the real estate sector. Even more so at a time when, due to an increasingly efficient economic globalization process, we are witnessing a constant migration of jobs from North America to emerging economies abroad.
Globalization and outsourcing were, in fact, the central theme of the annual symposium organized by the Federal Reserve Bank in Kansas City. The topic that was shot down and examined by the biggest minds in the economic world was how the rise of China, India and other countries is reshaping employment and wages within the North American economy.
It is commonly believed that workers’ wages in rich countries are being depressed by shifting jobs to low-wage countries, but the debate at the symposium has offered a much more optimistic view, with economists arguing that offshoring can actually increase the wages of domestic workers. The general feeling was that outsourcing increases the productivity and profits of companies, allowing them to expand and consequently hire more workers at home to do jobs that cannot easily be moved abroad. In essence, a line is being drawn between the low-skilled, low-paid jobs that can be transferred to emerging economies such as China, India, and to a lesser extent Russia, versus the skilled, higher-paid jobs that remain in the North. America.
Clearly, while low-skilled and low-paid jobs have little or no effect on the consumption of national real estate products, the picture changes dramatically with higher-paid jobs.
Outsourcing and labor migration is an issue that has as many political connotations as it does economic repercussions, particularly in an election year like this. Critics of outsourcing are quick to point out that between 1997 and 2004 the rationalization of companies through offshoring was not enough to create enough higher-paying jobs at home to offset the departure of low-paying jobs abroad. . And that evidence exists, even more so, insofar as in the United States, the euro zone, and Japan, total wages have actually fallen, in real terms, to their lowest share of national income, while the share of corporate profits have increased. An obvious indication that many ‘leaner’ companies have chosen to retain their profits rather than reinvest them in housework.
Precisely because of this, Prof. Ben Bernanke, Chairman of the Federal Reserve System, argued at the symposium that the scale and pace of globalization is unprecedented and that the overall gains will be enormous. But he has also warned that there is a risk of social and political opposition as some workers lose their jobs. The President has urged politicians, therefore, to ensure that the benefits of global integration are shared widely enough across levels of the economy to maintain support for free trade and enhance the democratization of wealth.
The real estate sector stands to benefit the most from a more equitable distribution of wealth in North America, both from the standpoint of increased demand and increased production and supply of inventory, because when people feel rich , they spend, a psychological effect known in economics as “The Wealth Effect.” Despite the short-term moderation in the number of existing home sales, the housing market may continue to benefit from expected long-term positive economic fundamentals, including expansion in gross domestic product generated by job creation and investments, together with a monetary policy of continuous moderate interest rates.
Louis Frascati
