For those interested in housing, the Coomunity Development Department of the Federal Reserve Bank of Minneapolis has established a website designed to convey information about housing and mortgage trends. The chart below is just one example of the information that is available.
Monthly Average (Mean) of Borrowers’ Credit Scores at the Time of Origination
This chart from RCLCo offers a concise summary of where real estate has been in the USA over the past few years–and where it might be headed. Of course, local market conditions and property specific circumstances can vary considerably. The RCLCo outlook for 2013 is available here.
As of December 2012, the United States was three and a half years into a recovery from its worst economic downturn since the Great Depression. Yet many retail centers continue to experience difficulty attracting sustainable tenancies and we are seeing more and more vacant big box stores (RREEF – 2012). The reason is that, overall, we have more retail space than we can sustain.
A look at the change in shopping center space statistics over the past several decades suggests that we have been on a building binge of massive proportion. As of the mid 1980s, there were approximately 15 square feet GLA (gross leasable area) of formal shopping center space per capita across the country (Serwer 2003). Since then, shopping center space, which accounts for about half of all retail space, has expanded four times faster than population growth. By 2010, we had about 24 square feet of shopping center space for every man, woman and child in the United States (McKinsey – 2010)!
A strengthening economy is unlikely to solve the problem of over supply of shopping center space. In fact, overall demand for retail stores is likely to shrink in coming years due to several factors:
Several years ago, analysts at RREEF pointed out that even during the massive expansion of shopping centers between the early 1980s and the onset of the Great Recession, retail spending generally grew more slowly than gross domestic product (GDP) (RREEF 2009). 
Perhaps even more significant, retail spending is not, and has not been, the major factor in the growth of the consumer sector. As the RREEF analysts point out, retail’s share of consumer outlays actually peaked more than sixty years ago–shortly after the end of World War II. We tend to forget that the consumer sector also includes items such as rent, medical care and travel. And the largest consumer growth category has been healthcare, which increased from only 3% to almost 18% of household expenditures between 1945 and 2008 (RREEF 2009. p. 4). So far, there is no evidence that this long-term rise in healthcare expenditures will abate.
More than any other factor, population growth will support the absorption of space in retail centers. As of 2012, the US Bureau of the Census bureau forecast the population of the United States to grow from about 315 million at the beginning of 2013 to 400 million in 2051—an increase of 33% over this 48-year period (U.S. Bureau of the Census 2012). If we added no more shopping center space beyond what we have now, this population growth would bring the amount of shopping center space down to a more sustainable ratio—about 17 square feet per capita—two square feet above where we were as of the mid 1980s.
But not all regions of the nation will grow equally. And the regions that have grown most rapidly tend to be those that have seen outsized growth in retail space. The simple fact is that under any economic and demographic scenario we have more shopping center space than we need. The next post will examine this challenge in greater detail and explore ways that we can turn this problem into an opportunity to create vital new neighborhoods.
References
Joe Wiesenthal reported on November 19, 2012, at Business Insider that the big economic datapoint of the day is homebuilder sentiment. This National Association of Homebuilders (NAHB) index is at its highest level since 2006. The chart below compares the NAHB Hombebuilder Sentiment index with the share of gross development product (GDP) attributed residential construction (with a 12-month lag). This surge in positive sentiment could foreshadow a significant increase in economic activity n the USA.
Steve Felix is a weekly blogger on institutional real estate and other topics. He has a knack for finding and distilling important information. On November 30, 2012, he posted information on real estate capitalization rates that he gleaned from a recent report prepared by the folks at Real Capital Analytics. Here is what he had to say:
This poster summarizes the residential course that Brad Olson designed and that Pike Oliver now teaches at Cornell University.
On August 22, 2012, 26 undergraduate students began work toward a Bachelor of Science in Urban Studies at Cornell University. These fourteen women and twelve men hail from Asia, North America and South America.
On August 4, 2012, the Sacramento Bee published an article that describes the boom-and-bust nature of that region’s housing market since 1976. Included, is a graphic (see below) that illustrates the location of the thirty metropolitan areas in the USA with the most and fewest quarters when home prices changed by two percent or more.
It is a good thing for Apple Support that I do not get to grade them. If I did, they would be getting a failing grade. One of their representatives just told me that their senior engineers had determined that Dropbox is not compatible with Mountain LIon (the new Mac OS.) So, I went to the Dropbox website to see what is up and . . .
