Sunday, October 28, 2007

Housing Is Taking Down Department Stores


I posted an article in September regarding Commercial CAP rates were (or would be) on the rise as a result of the slow down in the housing market and ensuing "credit crunch". The New York Times has an article yesterday showing the effects of the home builder problems and the correlation with the decline in department store value, which translates to slower consumer spending.

Since April, when investors voiced optimism that the housing slide had been contained, shares of the country’s biggest department store chains have fallen by about 30 percent.

With the sagging prices, investors have rendered a harsh judgment on the coming holiday shopping season, predicting that consumers will severely cut back on spending.

The gloom since April 20 has been spread evenly across the big chains: shares of J. C. Penney are down 33 percent, Macy’s by 27 percent, Kohl’s by 28 percent and Sears by 28 percent.

Robert J. Barbera, the chief economist of the Investment Technology Group, said, “The conventional wisdom of a year ago was that we would have a soft landing in housing.” But today, he said, “the stock market message is a hard landing for housing, with clear damage to consumer discretionary spending.”

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