Housing added 0.7 percentage points to real GDP growth in the first quarter of 2014, however the construction component (residential fixed investment) detracted from growth over the past two quarters owing to the poor weather conditions seen across the country over the period. In addition, housing accounted for 15.6 percent of total real GDP, which is low from a historical perspective.
The price component of GDP is becoming more interesting, however. Starting in 2012, housing has been contributing more to prices, for the most part, as seen in the figure below. In the first quarter of this year, it added over 0.7 percentage points to growth in the GDP price index, led by nearly 0.5 percentage points in the construction component (the most since the third quarter of 2008); the overall price index rose 1.3 percent. This is partly due to increased construction costs and higher rental prices.
Currently, overall inflation remains subdued and is within the Federal Reserve’s comfort zone. But moving forward, if housing becomes an even larger share of GDP, it would likely place upward pressure on inflation measures in general.