By Nick Timiraos

October 26, 2012

Friday’s report on U.S. economic growth confirms two emerging trends about the long-ailing housing sector: It is finally delivering a lift to the economy, but it is not delivering anywhere near the kind of boost that it traditionally has during a period of economic expansion.

Housing has now contributed positively to the nation’s gross domestic product in six straight quarters, which hasn’t happened since the housing bubble burst in 2006.

Residential fixed investment accounted for 0.33 percentage point growth in GDP during the third quarter, up from 0.19 percentage point in the second quarter and 0.03 percentage point in the year-ago quarter, the Commerce Department said on Friday.

Housing contributes to the economy in two key ways: the direct contribution to growth through home construction and improvements, and real-estate broker commissions, which is captured in the “residential investment” figures reported by Commerce.

But it also shapes consumer spending, through the so-called “wealth effect” (people may spend more when their homes rise in value because they feel richer, just as they might when stocks rise). Homeowners can also tap into the equity of their homes by taking out a home equity mortgage or through cash-out refinancing.

Jan Hatzius, the chief economist at Goldman Sachs Group GS +2.01%, published a report last week quantifying the impact of all three of these contributors—residential investment, the wealth effect, and mortgage-equity withdrawal—on economic growth. More…