Clouds are building on the horizon. Beyond the horizon, there are reports of quite a storm. Though forecasts vary, in both the timing and the intensity of the storm, forecasters are coming into the agreement that we are in for some unpleasantness.
The elements of this storm are not wind, snow, and frigid temperatures, though all of those are also in the local forecast. The storm I’m concerned about is caused by the combination of increasing inflation, flat incomes, declining home values, and increasing gas prices.
Headlines about foreclosures, a credit crunch, weak holiday sales reports, and $3.00 gas are abundant. Read deeper than the headlines and you find forecasts of $100/barrel oil and $4/gallon gas in 2008. There are predictions that foreclosures will surge, the housing recession will deepen, and house prices will fall 20-30% before the market hits bottom in a few years.
All of this leads to talk of a recession, even a serious recession. Some forecasters think it has already begun. Others think it will begin by spring. More and more think it is unavoidable, a view few shared even a month or two ago.
As we all know, sometimes the forecasters are wrong. Sometimes the storm fizzles and we get an inch instead of a foot or rain instead of snow or it misses us entirely. The old joke goes that economists have predicted nine of the last five recessions.
Only time will tell. A few points are worth noting, however. The recent surge in retail development – in Geneseo and across the American landscape – happened because of an extended period of really favorable weather, a kind of economic global warming. As I’ve written about before, cheap gas and cheap money conspired to give us cheap prices in cheap buildings.
Those sunny days are over. Now we get to see just how much too much retail sprawl occurred. Expect slower retail growth and more vacancies. There are early signs of this in Geneseo, and the retail bubble has only started to deflate.
A more important point is that it is conditions like these that should remind us the value of smart growth. Growth that is planned, that provides for a mix of development, and that respects the character of the community in which it occurs is growth that is sustainable. No economy is recession-proof. However, an economy that supports local businesses, that understands that not every day is sunny, and that understands that people need places to make money and not just spend it, is an economy that will withstand the storm.