by Calculated Risk on 10/27/2006 11:11:00 AM

Real residential fixed investment decreased at an annualized rate of 17.4% in Q3 2006.

Click on graph for larger image.

Residential investment (RI) has now fallen to 5.7% of GDP from the peak of 6.3% in the second half of 2005.

If RI falls back to the median level of the last 35 years (4.5% of GDP), the decline in RI has just started.

NOTE: It appears home equity extraction was strong in Q3 2006 based on preliminary GDP numbers (I'll post later today). So far there has been little spillover from the housing bust into the general economy, but that might be about to change for two reasons: 1) significant housing related job losses should start in Q4, and 2) declining home prices should start impacting MEW in Q4 or early 2007.