There's good economic news breaking out all over, it seems. The Fed's Beige Book report, released July 29, suggests that the pace of economic decline has started to slow. The stock market liked this news, responding with gains per Bloomberg. But does a little bit of economic improvement mean that the worst is over for commercial real estate? or that we'll have a fast recovery in CRE? I don't think so.

The continuing high rate of unemployment (14.5 million Americans were out of work in July per the Boston Globe) scares even those consumers who have jobs. So they spend less.
So many people overleveraged themselves through home equity extraction (and must either repay that money or have their houses foreclosed upon) that they don't have much money to spend. (Bloomberg reports that banks held a record $674 billion of HELOCs and $211 billion of closed- end home-equity debt as of March 31, according to FDIC data.)
So many people overleveraged themselves through credit card and other debt that they don't have much money to spend. And instead of buying more, they are apparently paying down their debts -- probably good for them personally, but collectively not great for increasing demand and growth in the economy. CNNMoney reported that since last August, the amount of outstanding consumer credit has declined, according to the Federal Reserve, with total consumer borrowing sinking a seasonally adjusted $10.3 billion, or 4.9%, to $2.503 trillion, and revolving credit, which includes credit card debt, fell $5.3 billion, or 6.8%, to $917 billion.

Business Week

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