After declines for six consecutive quarters, the home building component of gross domestic product (GDP) in the US increased during 3Q 2019.
This gain was due to the housing rebound that has taken hold since the spring, with the pace of single-family permits rising since April and the rate of single-family starts increasing since May.
The overall housing share of GDP in the US increased to 14.6% during 3Q 2019, as GDP growth slowed to a 1.9% rate.
The home building and remodelling component – residential fixed investment – increased modestly to 3.11% of total GDP and added 0.18 basis points to the headline GDP growth rate.
Housing Share of GDP Rises in 3Q 2019
Housing-related activities in the US contribute to GDP in two basic ways:
• The first is through residential fixed investment (RFI), and
• The second is the measure of housing services, which includes gross rents (incl utilities) paid by renters, and owners’ imputed rent (estimate of cost to rent owner-occupied units), and utility payments.
Taken together, housing’s share of GDP was 14.6% for the quarter.
Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. — NAHB Eye on Housing
Residential fixed investment is effectively the measure of the home building, multifamily development, and remodelling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodelling, production of manufactured homes, and brokers’ fees.
For 3Q 2019, RFI in the US was 3.1% of the economy, reaching a US$594 billion seasonally adjusted annual pace.
The measure of housing services in the US for 3Q 2019 was 11.5% of the economy, or US$2.18 trillion on seasonally adjusted annual basis.