Out of Order
Aug 1, 2008 12:00 PM
Nearly a year after it began, the credit crunch gripping financial markets is no closer to resolution. The losses are too large for the market to right, says Sam Chandan, chief economist with New York City-based Reis Inc. Already, the credit crisis cost the U.S. economy more than $900 billion, according to the World Bank. Meanwhile, the gross imbalance between the available supply and demand for new housing stock will likely result in further losses throughout the rest of the year.
“The near-term prospects for stabilization in the housing market are fairly dim,” Chandan says, adding that the U.S. economy needs have net household growth in order to fill the glut of empty homes and condos built in the past several years.
The resultant drop in consumer spending, which up to this point represented approximately 70 percent of the U.S. economy, will put extra pressure on the retail real estate sector. Further, the amount of new retail space delivered during this real estate cycle, including 136 million square feet this year alone according to Boston-based Property & Portfolio Research, will prove problematic with retailers' space demands still shrinking.
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