Monday, July 29, 2019

Q2 2019 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 7/29/2019 09:31:00 AM

The BEA has released the underlying details for the Q2 initial GDP report.

The BEA reported that investment in non-residential structures decreased at a 10.6% annual pace in Q2.

Investment in petroleum and natural gas exploration decreased in Q2 compared to Q2, and was down 8% year-over-year, 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 Q2, and is up 9% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 37% year-over-year in Q1 - and at a record low as a percent of GDP.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased in Q2, and lodging investment is up 6% 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, however it is close between single family and home improvement.

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 $267 billion (SAAR) (about 1.3% of GDP)..

Investment in multi-family structures increased in Q2.

Investment in home improvement was at a $261 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.2% of GDP).  Home improvement spending has been solid.