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Friday, July 29, 2022

Q2 2022 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 7/29/2022 11:16:00 AM

The BEA released the underlying details for the Q2 advance GDP report this morning.

The BEA reported that investment in non-residential structures decreased at a 11.7% annual pace in Q2.  

Investment in petroleum and natural gas structures increased in Q2 compared to Q1 and was up 31% year-over-year.   

Office Hotel Mall 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 (blue) increased slightly in Q2 and was up 5.7% year-over-year.  (Still declining as a percent of GDP).

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was up about 10% year-over-year in Q2 - from a very low level.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment increased slightly in Q2 compared to Q1, and lodging investment was down 2% year-over-year.

All three sectors - offices, malls, and hotels - were hurt significantly by the pandemic.

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).

Even though investment in single family structures has increased from the bottom, single family investment is just approaching normal levels as a percent of GDP.

Investment in single family structures was $473 billion (SAAR) (about 1.9% of GDP), and up 17% year-over-year.

Investment in multi-family structures was unchanged in Q2 from Q1.

Investment in home improvement was at a $347 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.4% of GDP).  Home improvement spending was strong during the pandemic.

Note that Brokers' commissions (black) increased sharply last year as existing home sales increased in the second half of 2020 but was down in Q2 2022.   Brokers' commissions were unchanged year-over-year in Q4 (down as a percent of GDP).