Housing Data in the US

 US Housing data

Housing is one of the most important sectors in the US economy. Residential investment – building new homes, remodeling houses, and the fees associated with selling them – accounts for around 5% of GDP. More than 2.5 million people are employed in the housing sector in the US, or around 1.7% of the labor force. Thus the health of the housing sector strongly influences the health of the economy as a whole.

Moreover, houses are the major financial asset that most people own; 65% of Americans own their own home while only 52% own any stocks, and even at that, holdings of stocks are overwhelmingly concentrated in a relatively small number of wealthy people. Thus changes in house prices greatly affect the emotions of consumers:  rising house prices make people feel richer and thereby encourage them to spend (the wealth effect), while falling house prices can make people feel poor (or even actually become poorer, if the value of their house falls below what they paid for it).

Because it is such a large part of the economy and so important to consumer sentiment, housing activity usually leads the business cycle. It is therefore is a key indicator to watch to judge where the economy is headed.

The attached “Word for the Day” explains some of the most closely watched indicators that economists and analysts use to measure activity in the housing market in US.