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Daily Real Estate News  |  September 11, 2006  |   After 9/11, Real Estate Helped Economy Recover
In the wake of the terrorist attacks of Sept. 11, 2001, the American economy and real estate market not only remained standing, but recovered quickly and then thrived in an environment of low interest rates and strong buyer demand.

That’s certainly not what the terrorists had expected. They wanted the attacks to send shock waves through the American financial system and severely harm the U.S. economy. In December 2001, Osama bin Laden said that the attacks had "shaken the throne of America and hit hard the American economy at its heart and its core."

But five years later, it’s clear that did not happen, Brian S. Wesbury, chief economist of First Trust Advisors L.P. in Lisle, Ill., says in the The Wall Street Journal Monday. Although business investment and the stock market took a while to recover, strong consumer spending and a hot housing market fueled other areas of the economy.

Trigger to the Housing Boom?

Wesbury says that the reaction to the tragedy by government agencies and the private sector was in large part responsible for the biggest real estate boom in American history.

To fight recession after Sept. 11, 2001, the Federal Reserve aggressively dropped interest rates to historic lows. Ordinary people, fearful of travel and viewing the stock market as too risky, took their nest eggs and spent them at home.

As a result, real residential investment — both renovations and home purchases — increased as much as 40 percent over the past five years, surpassing levels seen during the last real estate boom of the late 1980s, according to the Economic Policy Institute, a Washington, D.C.-based nonprofit think tank.

Buyer demand sparked a 47 percent jump in home prices over five years while the Standard & Poor’s 500 increased nearly 19 percent.

Big Apple Living Scene Thrives

Meanwhile, the local property market in New York City, which looked bleak immediately after the attacks, benefited from a surge of economic development in the wake of the terrorist attacks.

Before Sept. 11, 2001, there were 22,961 residents in the lower Manhattan area. By the second quarter of 2006, there were 37,081 residents, according to the Downtown Alliance, a group dedicated to revitalizing the area around Ground Zero.

The commercial market also has rebounded. “Many of the big projects that are under way today would not be where they are had it not been for 9/11,” Dan Doctoroff, New York City’s deputy mayor of economic development and rebuilding, told The New York Times. “The transformation of lower Manhattan, the expansion the West Side, the extension of the 7 line, the Atlantic Yards, the list goes on and on."

Real Estate Expansion Boosts Overall Economy

Nationwide, real estate growth over the past five years has put Americans to work. White- and blue-collar jobs fueled by the housing boom range up and down the income scale: real estate professionals, mortgage brokers, lawyers, title insurers, deed recorders, appraisers, movers, architects, engineers, interior decorators, plumbers, hardware store managers, Home Depot clerks, and manufacturers of cement and lumber.

“Spending on housing flows into a remarkably wide range of sectors — and the overwhelming majority of the spending is local,” points out Northern Trust economist Asha Bangalore.

In the end, it was not the attacks, but the reaction to them that has defined the economy for the past five years. As Wesbury says in The Wall Street Journal:“A capitalist economy, as long as it is kept free, is the ultimate hardened target.”

Source: The Wall Street Journal, The New York Times, Smart Money, BusinessWeek Online

Read More: REALTORSŪ Remember 9/11, Five Years Later; 9/11 Rememberance Web Site at REALTOR.org

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