Residential Investment Finally Contributes to Economic Growth

Expenditures on home purchases and residential construction grew by 12% in 2012 and residential investment will grow by another 12% next year, according to a new survey of 48 professional forecasters by the National Association of Business Economics.

The forecasters expect the “strong growth” in residential investment will continue in 2013.   

Residential investment was a negative 1.4% in 2011 when single-family and multifamily starts totaled 608,000.

The forecasters estimate 2012 housing starts will come in at 770,000 by yearend. And 2013 starts will jump 21% to 930,000 in 2013.  They also expect home prices will continue to rise in 2013.   

Separately, economists at CoreLogic reported that residential investment added 0.3 percentage points to U.S. gross domestic product over the past four quarters.

“While the level is low, it is contributing 12% of the overall low GDP growth rate,” according to a report authored by CoreLogic chief economist Mark Fleming and deputy chief economist Sam Khater.

“Residential investment is now providing the post-recession boost it normally does,” the authors write. “That is good news, because residential investment is the most important cyclical component of the economy.”