The recovering housing market is showing some impact in the retail sector.  Furniture stores are reporting an 11 percent increase in sales recently from a low point two years ago.  A stronger 22 percent in gains are occurring at building supply and gardening stores.

In addition to the visible impact to retail sales in stores directly related to housing, there is always a further multiplier effect even in areas such as restaurant spending and electronics as people earn more income from improved home sales.

The housing component to the broader economy (GDP) in the past years has not been pretty.  The declines in new home construction and existing home sales cut into GDP.  From 2006 to 2009, GDP was cut by about 1 percentage point.  That is, had the housing market not suffered the downturn and had been simply neutral, GDP growth would have been a full one percentage point higher.  (There is a big difference between 3% GDP growth versus 4% GDP growth, for example.)

Percentage Point Impact to GDP from the Housing Sector

Now, with housing showing some recovery, though at a moderate pace, the contribution to the GDP will be positive both this year and next.  A housing market recovery will result of an approximate 0.7 percentage point growth in GDP.  That’s good news for people working in the industry, for retail shops, and for the broader economy.