A
drop in home sales is likely to mean less spending at home improvement,
furniture, furnishings, electronics and yard and garden stores as well as less
retail construction in conjunction with new housing developments. Retail
spending in general, and therefore retail construction, might be impacted
more broadly by tighter lending standards or by stock-market declines that
reduce consumers’ wealth. The Journal
reported, “Collectively, retailers posted a 2.9% increase in July same-store sales, or sales at stores
open at least a year, according to an index of 48 major chains compiled by
Retail Metrics Inc. [vs. 3.9% a year ago]. Year to date, same-store sales are
up 2.8%, a sharp slowdown from the average gain of 3.7% seen in 2006.”
Retail
construction could also slow if tighter credit standards mean that some
developers no longer qualify for loans. This
impact could similarly affect other types of income-producing properties, such
as office, warehouse and hotel construction. Office construction might take a
hit as well from reduced demand for space from financial-services firms. For
instance, American Home Mortgage Inc. laid off 7,000 (mainly office) workers
two weeks ago, shortly before declaring bankruptcy. But the office market does not seem to be affected yet. Gary Rosenberger
(www.Econoplay.com)
reported, “’At this point we’re not seeing anything directly,’ said Ken
McCarthy, a managing director at Cushman & Wakefield in New York City,
referring to the impact of troubled credit markets on New York City commercial
real estate. He saw no signs of retrenchment in the second quarter or in July
in New York City or in the national market as a whole. ‘The market remains
strong so far, according to the statistics that we keep. We see nothing that
suggests weakening demand for office space.’”