Housing’s share of the economy remained at 15.8% at the end of the second quarter as overall GDP increased at an annual rate of 2.4%. Housing’s share of the overall economy remained consistent with the first quarter despite a 40 basis point improvement in GDP growth during the quarter, according to an analysis by the NAHB.
In the second quarter, the more cyclical home building and remodeling component – residential fixed investment (RFI) – decreased to 3.8% of GDP. RFI subtracted 16 basis points from the headline GDP growth rate in the second quarter of 2023. The last time RFI added to GDP growth was the first quarter of 2021, resulting in nine consecutive quarters where RFI has subtracted from overall GDP growth.
Housing-related activities contribute to GDP in two basic ways. The first is through residential fixed investment (RFI). RFI is effectively the measure of the home building, multifamily development, and remodeling contributions to GDP. For the second quarter, RFI was 3.8% of the economy, recording a $1.0 trillion seasonally adjusted annual pace.
The second impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, and owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units) and 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 for GDP. For the second quarter, housing services represented 12.0% of the economy or $3.2 trillion on a seasonally adjusted annual basis.
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. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly for the single-family sector
