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In the third estimate for the nation's fourth-quarter gross domestic product (GDP) growth recently released, housing retained a 15.25 percent share of the 2.2 percent GDP growth, according to the U.S. Bureau of Economic Analysis.
Homebuilding and remodeling, commonly known as residential fixed investment (RFI), made up 3.09 percent of housing's share in Q4. RFI includes new single-family and multifamily construction, residential modeling, manufactured home production and brokers fees, according to the National Association of Home Builders (NAHB). With an annualized pace of $504 billion in Q4, the RFI component of the GDP reached its highest quarterly rate since mid-2008.
The measure of housing services is the second component of housing that affects the GDP, comprising 12.15 percent of the economy. Housing services include gross rents (including utilities) paid by renters, owners' imputed rents, which are estimates of the cost of renting owner-occupied units), and utility payments. According to NAHB, without the inclusion of owners' imputed rents, increases in homeownership would result in declines for the GDP.
"Historically, RFI has averaged roughly 5 percent of GDP while housing services have averaged between 12 percent and 13 percent, for a combined 17 percent to 18 percent of GDP," NAHB economist Robert Dietz wrote on the NAHB's blog. "These shares tend to vary over the business cycle."
The third estimate of Q4 for GDP growth of 2.2 percent is below the rate for the entire year, which was 2.4 percent. The slower growth carried over into Q1 due to "temporary factors" cited by Fannie Mae, such as a drawdown in inventory, unusually high snowfall in some parts of the country, and the West Coast port slowdown.
Nonetheless, Fannie Mae expects the reduction of these temporary factors, combined with upbeat labor market conditions and positive consumer and business fundamentals, to push GDP growth up to 2.8 percent in 2015.
"The economy is getting a boost from the strong employment numbers we’ve seen last year and at the start of 2015," Fannie Mae Chief Economist Doug Duncan said earlier this month. "When this employment growth partners with income growth and consumers experience a rise in their personal household income, we should see a similar boost in the housing sector. Overall, we expect an improving 2015 with continued economic growth bringing housing above 2014 levels."
