Good News for the Real Estate Economy: Housing’s Share of the U.S. Economy Climbs to 16.4% in Q1 2025
- Faundare Financial Research Institute
- May 14
- 2 min read
Real Estate 2025 Overview
The U.S. housing and real estate sector kicked off 2025 with notable momentum, contributing 16.4% to the nation’s gross domestic product (GDP) in the first quarter. This marks the highest share since the third quarter of 2022 and reflects the combined strength of both new residential construction and housing-related services.
According to the latest report from the National Association of Home Builders (NAHB), gains were seen in both Residential Fixed Investment (RFI) and housing services, signaling a positive trajectory for the sector amid shifting economic conditions.
Breakdown: What’s Included in Real Estate and Housing’s GDP Contribution?
Housing’s share of GDP includes two main components:
1. 🛠 Residential Fixed Investment (RFI)
This includes:
Construction of new single-family and multifamily homes
Residential remodeling
Production of manufactured homes
Brokers' fees and related equipment
📊 Q1 2025 Data:
RFI Share of GDP: 4.1% (up from 4.0% in Q4 2024)
Total RFI Value: $1.216 trillion (seasonally adjusted annual rate)
Key Subcomponents:
Single-family construction: +5.9%
Multifamily construction: −11.5% (7th consecutive quarterly decline)
Residential equipment: +5.5%
2. 🏘 Housing Services
This includes:
Gross rents (actual and imputed)
Owners' equivalent rent
Utilities paid by households
📊 Q1 2025 Data:
Housing Services Share of GDP: 12.3% (up from 12.2%)
Total Value: $3.691 trillion
Highlights:
Real personal consumption for housing: +1.3%
Utilities expenditures: +18.7%
Residential natural gas consumption reached 1.035 trillion cubic feet in January 2025, the highest monthly total since January 2014
Historical Context
Over the past five quarters, housing’s share of the economy has shown a gradual upward trend:
Quarter | Housing Share of GDP |
Q3 2023 | 15.9% |
Q1 2024 | 16.1% |
Q2 2024 | 16.1% |
Q4 2024 | 16.2% |
Q1 2025 | 16.4% |
The increase in Q1 2025 reflects both rising consumer spending in housing services and a rebound in single-family construction activity, even as multifamily construction continues to decline.
Why It Matters
The housing sector serves as a critical engine for economic growth. The steady rise in its share of GDP:
Signals growing consumer confidence
Reflects resilient housing demand despite high interest rates
Indicates policy relevance as housing costs, utility consumption, and supply constraints continue to shape inflation and monetary policy debates
As the economy continues to evolve, the health of the housing sector will remain a key indicator of broader economic performance.
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