Housing and GDP

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Date Published 2001
Primary Author Michael Carliner
Other Authors
Theme Housing Supply


Gross Domestic Product, the measure of total production of goods and services in the nation, includes products of capital goods to be used for future production. Housing is a major part of both current consumption and private investment. In 2000, the combination of consumption and private investment spending on housing represented 14 percent of GDP. Construction of new homes is part of the investment component of GDP. Residential fixed investment (RFI) totaled $425 billion in 2000, representing 4.3 percent of GDP and 24.1 percent of gross private domestic investment. New conventional single family and multifamily structures accounted for $249 billion, or 59 percent of RFI. The other major components of RFI include improvements to existing homes ($102 billion), real estate commissions ($55 billion), manufactured housing ($11 billion), and equipment such as appliances for rental housing ($9 billion).1 RFI is one of the more volatile components of GDP. Within the past 25 years, the RFI share of GDP has ranged from 3.2 percent in 1982 and 1991 to 5.7 percent in 1978. The most recent peak in that share was in 1999, when it was 4.4 percent. In this context, this paper talks about the relationship between different types of housing investments and the GDP.

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