by Calculated Risk on 2/02/2009 11:09:00 AM

This is a first ... investment in home improvements exceeded investment in new single family structures for the first time ever in Q4 2008 (it was close in Q3).

Residential investment, according to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Click on graph for larger image in new window.

This graph shows the various components of RI as a percent of GDP for the last 50 years. The most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $170.8 billion Seasonally Adjusted Annual Rate (SAAR) in Q4, above investment in single family structures of $150.2 billion (SAAR) for the first time ever.

Let's take a closer look at these two key components of RI:

As everyone knows, investment in single family structures has fallen off a cliff. This is the component of RI that gets all the media attention - although usually from stories about single family starts and new home sales.

Currently investment in single family structures is at 1.05% of GDP, significantly below the average of the last 50 years of 2.35% - and also below the previous record low in 1982 of 1.20%.

But what about home improvement?

The third graph shows home improvement investment as a percent of GDP.

Home improvement is at 1.20% of GDP, off the high of 1.30% in Q4 2005 - but still well above the average of the last 50 years of 1.07%.

This would seem to suggest there remains significant downside risk to home improvement spending over the next couple of years.