Thursday, August 05, 2010

Residential Investment Components in Q2

by Bill McBride on 8/05/2010 11:19:00 AM

More from the Q2 2010 GDP underlying detail tables ...

Note: Residential investment (RI), according to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Residential Investment Components Click on graph for larger image in new window.

This graph shows the various components of RI as a percent of GDP for the last 50 years. Usually the most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $150.8 billion Seasonally Adjusted Annual Rate (SAAR) in Q2, significantly above the level of investment in single family structures of $119.7 billion (SAAR).

Investment in single family structures has been increasing since bottoming in Q2 2009, however - based on home builder comments and a collapse in new home sales - this will decline sharply in Q3.

Brokers' commissions will also decline sharply in Q3 as the number of existing home sales falls off a cliff in July and August (based on pending home sales).

And investment in multifamily structures - already at a series low as a percent of GDP (since 1959) - will decline further in Q3 since completions have been significantly above starts for some time.

According to the BEA, RI contributed 0.59 percentage points to real annualized Q2 GDP growth, and a RI will probably subtract about the same amount from Q3 (part of the 2nd half slowdown).