The American Dream of home ownership is one of the primary drivers of the US economy. Housing activity affects the investment (I) component of the aggregate expenditure formula for calculating gross domestic product: C+I+G+(X-M). The construction of new, privately owned residential structures, particularly single-family homes, is very telling regarding consumer sentiment and the health of the economy.

While new housing only accounts for 3 percent of GDP it can have a profound effect on the economy due to the multiplier effect of related spending and other indirect contributions. Once a home is bought, it must be furnished and decorated. All of this activity means new jobs for construction workers, retail salespeople, and manufacturers; increased tax revenues for local and state municipalities; and greater spending on goods such as carpeting, furniture, and appliances.