The Q3 GDP growth forecast according to the Atlanta FED GDP tracker dropped from 3% to 2% in two days. Weak data on industrial production was accompanied by weak data from the real estate market. Housing Starts fell 6.8% in July to 1,238 million (exp. 1.33 million, prev. 1.329 million). This lowered the GDP forecast to 1.99% from 2.44% - with Residential Investment subtracting as much as 44bps from GDP. See Figure 1 and Table 1.
The decline in Residential Investment is now -11.7% SAAR in Q3 2024. See Figure 2. This decline in Residential Investment in Q3 also means a decline in the real value of Residential Investment in Q3 by $24 billion - see Figure 3.
Figure 4 shows Housing Starts from 2004 and Figure 5 from 1959. Single-family starts tumbled 14.1% to 851k and multi-family soared 14.5% to 387k – see Figure 6 (multi-family are 2 or more units).
What caused such a large decline in Housing starts? Some point to Hurricane Beryl, but the market weakness was not limited only to the south of the country. High interest rates may end up having a greater impact on this market.
Bonus chart – all 3 main series from the residential market (permits, starts, units completed) run more or less together in cycles.. – see Figure 7.
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