According to the ‘advance’ estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 33.1% in Q3 of 2020. In the Q2 the real GDP decreased by – 31.4%. A deeper dive into the BEA Q3 GDP report, provided by the National Association Home Builders (NAHB) reveals that residential fixed investment (home building and remodeling) expanded at a 59.3% annual rate. As the rest of the economy recovered in Q3, housing share of the GDP slipped to 15.5%, down from 16% in Q2. Nevertheless, except for the historic second quarter, this is the highest share of the GDP for housing since the summer of 2008. Housing contributes to the GDP in two ways: 1) The first is through residential fixed investment (RFI). RFI is effectively the measure of the home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees. 2) The impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, and owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units) and utility payments.
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3Q GDP: Residential Investment Up at a 59% Growth Rate