By George Ratiu, NAR Research Economist
The third quarter of 2009 brought signs of relief to a U.S. economy fighting to emerge from what has been coined the Great Recession. Most measures of economic activity moved in upward trends—gross domestic product turned positive after four quarters of decline; industrial production gained; stock market indices have been surging.
However, commercial real estate did not find its footing in the constantly shifting terrain of weak fundamentals and timid transaction activity. Demand for commercial properties continued on a downward path, adding pressure on prices and rents. Moreover, credit conditions continued to tighten as banks moved to strengthen their balance sheets. As a result, vacancy rates have been rising and the volume of distressed properties has grown. Nonetheless, it is worth noting that the pace of decline in fundamentals is slowing, and sales transactions are posting positive growth.
Following four consecutive negative quarters, gross domestic product (GDP) rose 2.8% in the third quarter of 2009. The increase was prompted by improvements in all GDP components. Consumer spending moved up 2.9%, driven by strong activity in durable goods consumption. In particular, motor vehicles and parts spending jumped 43.4% during the quarter. The spike was a direct result of the ‘cash for clunkers’ program.
