The slow recovery from the historic downturn in residential construction continues in 2016. In the mid-2000s, increasing prices and easy credit led to a rush of investment in residential construction. At the end of 2005, new residential investment accounted for an unsustainable 6.5% of GDP above its long-term rate. After dropping to a historic low of under 2.6% of GDP in 2010, it has since rebounded to 3.6%.
Both single- and multi-family housing starts have recovered from their lows of 550,000/year at the end of 2008 to 1.2 million currently. In 2015, existing home sales were 5.9% higher than 2014, with 5.25 million sold. New home sales were up even more, at 14.6% in 2015 with 500,000 units sold. Employment gains, record low interest rates and low inventory of existing homes for sale continue to be supportive of the new home market. However, as Figure 1 shows, new home sales and starts remain well below their 2005 peak.