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Commercial Real Estate in Trouble

Adam R.'s picture

Posted January 20, 2009

The country is celebrating its new leadership today, but the storm clouds are gathering and the horizon looks grim.  Yes, the Dow dropped almost five percent today and the nasdaq was off even more.

While the trouble surrounding mortgages spent several years brewing, the next crisis could come much quicker.  Some people are suggesting that a decline in consumer spending, hastened by the lack of cash from home equity, will soon paralyze commercial real estate.  People are just not going to be shopping at the mall as much.  They are going to wear that sweater another season.  They are going to keep their old flat screen.  They are not going to go out and charge new drapes and some nice pillow cases.

A Skeptical View of Housing

Adam R.'s picture

Posted January 5, 2009

The Atlantic Monthly says that the United States will have an oversupply of around 22 million single-family homes by 2030.  The estimate comes from conclusions made by various demographers and planners.

If our supply of housing stock were to remain constant, then this prediction says that two in five single family homes will be empty.  It is a statement that suggests a catastrophic impact upon the urban landscape.

One possibility suggested by this prediction is an end to suburbia.  James Kunstler has already imagined what this might look like in his book, The Long Emergency, but that conclusion is driven by a shortage of a different sort.  In that case, it is a lack of fossil fuels.  Here, the oversupply stems from another force - demography.  Perhaps it is all the more troubling that the scenarios are not mutually

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