The housing market continued to reap gains and increased its share of GDP in Q1 2022.

Housing Market’s Share of GDP Increased in Q1 2022

Due to the pandemic-inspired focus on the importance of home, a shifting geography of housing demand and a lack of for-sale inventory, the housing market nationwide continued booming through the beginning months of 2022. The result?  The National Association of Home Builders (NAHB) indicated that housing’s share of GDP remained elevated compared to most of the post-Great Recession period.

The NAHB reported that the housing market’s share of GDP increased to 16.7% in Q1 2022, up from 16.4% in Q4 2021.


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Housing Activities Contribute to GDP in Two Ways

Residential Fixed Investment (RFI) is basically the measure of home building, multifamily development and remodeling contributions made to the GDP.  The RFI includes construction of new single-family and multifamily structures, residential remodeling, the production of manufactured houses and brokers’ fees.

During Q1 2022, RFI was 4.8% of the GDP, recording a $1.18T seasonally adjusted annual pace.

The second way housing activities contribute to the GDP is the measure of housing services…services that include gross rents (plus utilities) paid by renters and homeowners’ imputed rent (a homeowner’s estimate of how much it would cost to rent owner-occupied units) plus utility payments.

During Q1 2022, housing activities/services accounted for 11.9% of the economy, or $2.9T on a seasonally adjusted annual basis.  Added together, RFI and housing services accounted for 16.7% of our country’s GDP in Q1 2022.

Affordability Challenges Likely to Reduce Momentum for New Construction

The NAHB suggests that new-home construction may be hampered going forward due to the Federal Reserve’s tightening monetary policy designed to cool inflation.

Higher interest rates are already having a negative effect on on new home buying because of increased challenges regarding housing affordability.  Those affordability challenges will only worsen as interest rates continue rising.

Historic Comparisons

Historically, according to the NAHB, RFI has averaged approximately 5% of GDP while housing services have averaged about 12%-13% for a combined total of 17%-18% of our nation’s GDP.

Save the post-Great Recession time period due to pronounced underbuilding in the single-family sector, the recent uptick in housing activity has increased housings’ shares to the GDP by near-historic norms, according to the NAHB.

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Thanks to the National Association of Home Builders

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