Friday, January 31, 2020

Q4 2019 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 1/31/2020 09:35:00 AM

The BEA has released the underlying details for the Q4 initial GDP report this morning.

The BEA reported that investment in non-residential structures decreased at a 10.1% annual pace in Q4.

Investment in petroleum and natural gas exploration decreased in Q4 compared to Q3, and was down 19% 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 decreased in Q4, but was up 3% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 32% year-over-year in Q4 - 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 Q4, but lodging investment was up 1% 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 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 $282 billion (SAAR) (about 1.3% of GDP)..

Investment in multi-family structures decreased in Q4.

Investment in home improvement was at a $268 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.2% of GDP).  Home improvement spending has been solid.