The components of residential investment in the fourth quarter GDP report (which is subject to revision, of course) is worth looking at more closely.
Single-family housing, which made up more than 3.5% of GDP at the peak, has declined precipitously, but registered a slight increase in the fourth quarter. Another driver of growth in residential investment was brokers’ commissions, which were sparked by the rapid rate of home sales. These drivers were offset by continued declines as a percentage of GDP in multi-family investment and residential improvements.
What should you read into the numbers? The recovery is in the timing; the new home and resale home market began its decline earlier than other segments of the residential investment economy. Improvements are driven partly by home values and partly by income; multi-family investment is driven by access to credit markets and property valuations.
Sustained improvement in the residential real estate market will help to drive increased investment in home improvements. The dynamic for the multi-family is somewhat more complex, but hinges to a large degree on stability in the employment markets.
Thanks to CalculatedRisk for the chart.