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Thursday, October 31, 2019

Q3 2019 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 10/31/2019 11:22:00 AM

The BEA has released the underlying details for the Q3 initial GDP report.

The BEA reported that investment in non-residential structures decreased at a 15.3% annual pace in Q3.

Investment in petroleum and natural gas exploration decreased in Q3 compared to Q2, and was down 16% year-over-year.

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 Q3, and is up 6% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 37% year-over-year in Q3 - 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 decreased in Q3, but 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 $272 billion (SAAR) (about 1.3% of GDP)..

Investment in multi-family structures decreased in Q3.

Investment in home improvement was at a $264 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.2% of GDP).  Home improvement spending has been solid.