by Calculated Risk on 12/21/2011 03:48:00 PM

The NAR mentioned today:

For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.

Several readers have asked about the impact on GDP. The answer is very little.

When a previously occupied home is sold, nothing is "produced" except some commissions and fees. So the only significant contribution to GDP is the brokers' commissions. Since the BEA uses the NAR existing home sales report to estimate brokers' commissions, commissions will be revised down for 2007 through 2011. Brokers' commissions are a component of Residential Investment.

The following table shows an estimate of these downward revisions. As an example, brokers' commissions in 2007 will be revised down to $76.9 billion from $86.6 billion, and Residential Investment and GDP will be revised down by the same amount (my estimate)

But real GDP annualized growth will mostly be unchanged for the last several years. Since GDP growth is the change from one period to the next, the most impact will come to years with the largest changes in the NAR revisions (from 2006 to 2007). It is possible 2007 will be revised down slightly. There will be no change to real GDP growth in 2011.

Impact of NAR revisions on GDP (Billions)
	2006	2007	2008	2009	2010	2011
NAR Downward Revision	0	-11.1%	-15.5%	-16.0%	-14.6%	-14.4%
Brokers' commissions on sale of structures	101.5	86.6	66.9	58.6	55.2
Revised, Brokers' commissions	101.5	76.9	56.5	49.2	47.1
Residential Investment	761.9	628.7	472.4	354.7	338.1
Revised, Residential Investment	761.9	619.1	462.0	345.3	330.0
Gross domestic product	13,377.2	14,028.7	14,291.5	13,939	14,526.5
Revised, GDP	13,377.2	14,019.1	14,281.1	13,929.6	14,518.4
GDP Real Growth Rate	2.7%	1.9%	-0.3%	-3.5%	3.0%
Revised, GDP Real Growth Rate	2.7%	1.8%	-0.3%	-3.5%	3.0%

Earlier:
• Existing Home Sales in November: 4.42 million SAAR, 7.0 months of supply
• Existing Home Sales Revisions
• CoreLogic: Existing Home Shadow Inventory remains at 1.6 million units
• Existing Home Sales graphs