August 22, 2013
Morning Edition had a segment on the housing recovery which substantially overstated its likely contribution to the recovery. The expert analyst the piece relied upon suggested that housing construction could add 1.0 percentage point to GDP growth over the next three years. This would imply a near doubling of its contribution over the last year.
According to data from the Bureau of Economic Analysis, housing has added an average of just less than 0.4 percentage points to growth over the last four quarters. Its peak contribution in this period was just 0.5 percentage points. Even assuming a multiplier of 1.5, the average contribution over this period would be just 0.6 percentage points, considerably less than the 1.0 percentage point suggested by NPR’s expert.
It is also remarkable that the piece never referred to the vacancy rate which is still near record highs. This is a key factor holding housing starts down.
Comments