Monday, April 29, 2019

Q1 2019 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 4/29/2019 01:02:00 PM

The BEA has released the underlying details for the Q1 initial GDP report.

The BEA reported that investment in non-residential structures decreased at a 0.8% annual pace in Q1. Investment in petroleum and natural gas exploration was mostly unchanged in Q1 compared to Q4, but has increased substantially over the last two years.

Office Investment as Percent of GDPClick on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices increased in Q1, and is up 7% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 22% year-over-year in Q1.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased in Q1, and lodging investment is up 10% year-over-year.

Residential Investment Components The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Usually single family investment is the top category, although home improvement was the top category for five consecutive years following the housing bust.  Then investment in single family structures was back on top for six years - but home improvement investment exceeded single family in Q1.

Even though investment in single family structures has increased from the bottom, single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect some further increases.

Investment in single family structures was $264 billion (SAAR) (about 1.3% of GDP)..

Investment in multi-family structures increased in Q1.

Investment in home improvement was at a $274 billion Seasonally Adjusted Annual Rate (SAAR) in Q1 (about 1.3% of GDP).  Home improvement spending has been solid.