On July 27th the U.S. Commerce Department released new gross domestic product (GDP) estimates for 2018 Q2. The U.S. GDP grew by 4.1%, up from 2.2% in the first quarter, which was in line with expectations. Business Forward hosted a webinar with Paul Bishop, Vice President of the National Association of Realtors, to discuss these numbers and their impact on the housing market.
Contributions to growth came particularly from a 4% increase in consumer spending, along with personal consumption expenditures, net exports, and, to a lesser extent, an increase in government spending, which was offset by a 1.1% drop in residential housing. Bishop noted that “a lot of us thought that the consumer spending would be very strong” and attributed it to the fact that “consumer confidence has been very strong” particularly as a result of the “low unemployment rate and the fact that we’ve been adding jobs at a pretty consistent pace.” Exports, specifically soybean exports, were up 50% but most experts cautioned this point because those sales were accelerated by purchasers trying to get ahead of retaliatory tariffs.
On the housing market, Bishop noted that the “housing activity numbers are really disappointing,” and “the last several quarters it has been pretty disappointing.” According to Bishop, “the primary way to loosen up the housing market and to get more supply in the market is simply to build more homes.” He continued by noting that “we should be building something over 1.2 million single family homes every year and right now we’re in the neighborhood of just over 800,000, so that shortfall is causing tightness in the market. New homes aren’t available on the market and that puts greater pressure on the existing home sales market.
“Housing definitely can make a fairly strong contribution [to the GDP],” Bishop explained. “There are many segments of the economy that are related to the housing market, not just the obvious ones like construction…but also aspects of the financial market, small businesses at the local level, and the list goes on and on. Each home sale makes a significant contribution at the local level.
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