One of the main reasons there is so much real estate and housing news is that real estate drives a significant portion of our economic engine.

When someone buys or sells a home, the downstream revenue, that is, the dollars spent that are not directly related to the sales price of the home, are enormous.

One home sale, for example, could trigger business for a moving company, a furniture store, an electronics store, a hardware store or home center, an appliance store, the telephone company, a cable TV or Internet provider, an office supply store, a local grocery, several restaurants and many more local businesses.

Without that sale, those enterprises must rely on pitching their products and services to residents who usually have less urgency about their situation.

In 2002, we moved from a two-bedroom condominium to a four-bedroom home. The dwellings were only three miles apart, but the non-sale expenses could have been the same had we moved across the country.

We bought $15,000 worth of landscaping, new living room furniture consisting of a sofa, two chairs, a coffee table and an entertainment center. We bought a new dining table and chairs for our large kitchen, a new mattress for mom and dad, a new bed for our son, and a ridiculous amount of small hardware items, including new handles for every door.

Plus, being in a state of flux gave us a very good reason to eat out often. So, we did.

Now take our purchases downstream.

Our landscaper, for example, had to buy plants, sod, all of the items required for a sprinkler system and even one beautiful palm tree. Independently, my wife bought a coral tree that she had installed by a separate professional.

The total of our non-sale expenses was around $35,000, much of which went to local, independent merchants.

Now multiply that scenario by the thousands all across Orange County and you will get an idea of just how powerful is the real estate engine.

On April 1, Freddie Mac released the results of its Primary Mortgage Market Survey, which revealed that interest rates for a 30-year fixed rate loan rose slightly to 4.86%, up five basis points from the previous week.

Last year at this time, the same loan was available at 5.08%.

Frank Nothaft, vice president and chief economist at Freddie Mac, added, “Sales of distressed properties continue to place downward pressure on house prices. In January, these homes accounted for 37% of existing home sales and rose to 39% in February, based on figures from the National Assn. of Realtors. House prices were down 3.1% in January from the same month last year according to the S&P/Case-Shiller Home Price Indices.”

All of which is a mixed blessing. Rising interest rates may seem like a deal breaker for buyers, but those with even a short memory of mortgage rates realizes that this is still relatively cheap money, but the threat of rising rates are often enough to turn casual buyers into serious ones.

Falling home prices may seem like a good thing, at least for buyers, unless you dig deeper into the cause. According to a report issued on March 30 by Santa Ana mortgage research firm CoreLogic, the backlog of troubled homes, called the “shadow inventory,” could propel the housing market into a double dip, despite the fact that January’s inventory decreased from two million properties to 1.8 million nationally.

Does this inventory put downward pressure on home prices? Perhaps. But there is another school of thought, one supported by recent sales data, that believes that the shadow inventory consists largely of home in less desirable locations (think Stockton, the Inland Empire) and that the appetite for the homes in much of Orange County, particularly the coastal and near-coastal regions is growing.

All of which brings us back to that downstream revenue that is so important to our overall recovery. Call that the shadow economy.

STEVE SMITH is a Costa Mesa resident and a freelance writer. Send story ideas to smi161@aol.com.