Housing’s Contribution to GDP Holds Steady as Growth Soars

The Gross Domestic Product (GDP) grew 6.9 percent in the fourth quarter of 2021, bringing the year’s growth to an expected 5.5 percent, the fastest since 1984. The consensus of forecasters had been an increase of 5.5 percent for the quarter. While consumer spending at the beginning of the quarter and inventory in the closing days accounted for the unexpected surge from 2.3 percent growth in Q3, Robert Dietz, chief economist for the National Association of Home Builders (NAHB) says the housing sector certainly played a role. Residential investment accounted for 16.4 percent of the total GDP. While this was down slightly from the 14-year high of 17.8 percent it reached in the second quarter of 2020, that was a period when much of the country was in lockdown. That year ended with the economy shrinking 3.4 percent. The housing component of the GDP has two parts. The first is residential fixed investment (RFI) this includes dollars expended for residential construction (single and multifamily) home remodeling, production of manufactured housing and broker fees. Sales of homes are not included in the GDP. The second component is housing services. This includes gross rents including utility payments from renters and imputed rents from homeowners. The latter is an estimate for what it would cost if they had to rent their homes and pay their utilities. While imputed rents may not seem logical, without this calculation any increase in homeownership would drive the GDP lower.