Monday, November 23, 2009

Residential Investment

The recent real GDP figures showed that residential housing construction rose at a 23 percent annual rate in the third quarter. Presumably this was related to the tax credit for first time home buyers, the purchases of huge amounts of mortgage backed securities by the Fed, and lower housing prices.
Of course, a 23 percent annual growth rate is a bit over 5 percent during the three month period, which doesn't look quite so large.
However, is is remarkable how residential construction remains compared to the 2005 peak. I put together the following graph at the St. Louis Fed site.
The blue line represent real investment and the red nominal investment. Real residential investment remains 53 percent below the peak and nominal residential investment is 55 percent below its peak.



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