Housing is an important source of economic growth. As of the second quarter of 2013, housing’s share of gross domestic product (GDP) was 15.6 percent, with home building yielding 3.1 percentage points of that total.
Housing-related activities contribute to GDP in two basic ways.
The first is through residential fixed investment (RFI). RFI is effectively the measure of the home building and remodeling contribution to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees. For the second quarter, RFI was 3.1 percent of the economy.
Over the last two years, the pace of RFI has grown by $108 billion while GDP has grown by $668 billion (as measured in 2009 dollars). Thus, home building growth has been equal to more than 16 percent of GDP growth. Over just the last year, the figure is even larger: 25 percent of GDP growth. It should be noted that GDP is a measure which includes both positive and negative contributions, but these numbers nonetheless indicate the role that housing can play in expanding growth.