The Impact of Housing on the Economy
We recently posted about the nation’s GDP was up 2.8% in Q2, 2024. The NAHB’s Eye on Housing took a deeper dive into the numbers to reveal that housing’s share of the economy stayed level at 16.1% in the Q2, 2024 and remained above 16% after staying constant at 15.9% for all of 2023. In addition, the more cyclical home building and remodeling component, residential fixed investment (RFI), was 4.0% of GDP, level from 4.0% in Q1, 2024. RFI subtracted 5 basis points from the headline GDP growth rate in the second quarter of 2024, marking the first negative contributions since the second quarter of 2023. Indeed…
Housing-related activities contribute to GDP in two basic ways:
The first is through residential fixed investment (RFI). RFI is effectively the measure of home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees.
The second impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units) with utility payments. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines in GDP.
Click here to read the full report at the NAHB’s Eye on Housing.