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Housing Affects First Quarter Economic Growth

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Housing Affects First Quarter Economic Growth

The U.S. economy is built upon the production, distribution or trade and consumption of many different goods and services and the housing share makes up a significant portion of it. In the first quarter of 2014, 15.5 percent of the gross domestic product (GDP) came from housing, with homebuilding accounting for three points of that total, according to a new report from the National Association of Home Builders.

GDP is affected by housing-related activities in two ways, first, through residential fixed investment (RFI). RFI is the measure of the remodeling and home building contribution to GDP. It includes the construction of new, single-family and multifamily buildings, residential remodeling, production of manufactured homes and brokers’ fees.

Secondly, housing impacts GDP through the measure of housing services, i.e., 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.

Historically, RFI has averaged about five percent of GDP while housing services have averaged between 12 percent and 13 percent. These shares tend to vary over the quarters.

Read the full article from NAHB here.


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