Housing’s Share Provides a Bright Spot in the First Quarter GDP

As previously reported, the GDP growth performance for the first quarter of 2020, was the worst since the Great Recession, recording a negative growth rate of -4.8%. However, amidst all the gloom and doom there was some positive news regarding housing’s share of the GDP, which increased to 14.9% in the first quarter. The repair and remodeling component – aka residential fixed investment – also increased modestly to 3.3%. Economist believe that as the economy begins to recover later in 2020 that housing will play a leading role. Housing entered this recession underbuilt, not over built as in previous recoveries. In fact, based on demographics and current vacancy rate, the U.S. may have a 1-million-unit shortfall. Home building and remodeling have demand-side potential that can help fuel a recovery in the labor market, given the widespread positive affect that construction has on the economy in terms of jobs and tax revenue they provide.