The decline of the shopping mall

Shopping malls across the country are experiencing near-record vacancy rates, thanks a flagging retail market.

Carlos Gonzalez/AP/The Star Tribune/File
Shoppers walked out of Bloomingdale's at the Mall of America in Bloomington, Minn. Malls across the country are facing a rash of store closings, resulting in unprecedented vacancy levels.

According to Bloomberg, banks are beginning to push short sales consistently for the first time since foreclosures began to pile up back in 2008. Prices really began to fall before the financial crisis, as early as mid-2007 in some places, but banks have long placed numerous obstacles in the way of homeowners who tried to sell their homes for what they were actually worth in the marketplace. Those of us who have worked with real estate agents who do short sales have heard nothing but complaints for years about how banks will stall and prevent short sales in a variety of ways. The result is that the property then goes into foreclosure and ends up selling for far, far less as an REO property post-foreclosure.

Why would banks do this? Well, banks have for years just assumed that home prices would turn around “any day now.” Their army of PhD economists, who ran their little computer models to tell them what would happen, told them to just avoid facing the reality of home prices for just a little while longer, and then everything would be OK. After nothing but declines since 2008, some banks are coming to terms with reality.

The article mentions CoreLogic’s home price index as ongoing proof of price declines, and we could also point to Case-Shiller in which the composite index has declined year over year fro the past 14 months or so, ever since the tax credit ended. In other words, government meddling did nothing but postpone the inevitable.

The New York Times reports on vacant malls across the American landscape. Thanks to declining retailers:

The result is near-record vacancy rates at malls of all kinds, both the big enclosed ones and the sprawling strips. Sears Holdings is closing up to 120 stores, Gap Inc. 200 stores and Talbots 110. Abercrombie & Fitch closed 50 stores last year, Hot Topic, almost the same number. Chains that have filed for bankruptcy in recent years, like Blockbuster, Anchor Blue, Circuit City and Borders, have left hundreds of stores lying vacant in malls across the country.

The political side of this is that these malls were cash cows for state and local governments and now that revenue is drying up. It’s not just that people are buying less stuff, it’s also that a lot of it has moved online, so the stakes are very high for governments seeking to tax internet sales.

Meanwhile, while single-family and retail real estate remains in the dumper, multifamily loan originations spiked 64% in 2011. The multifamily industry is just making up for lost time after almost a decade of misallocation of resources toward single-family mortgages in response to Fannie, Freddie and the Fed pushing homeownership like there’s no tomorrow. Multifamily production and demand suffered from about 2003 through 2009, thanks to government and GSE edicts on mortgages.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.