INTERNATIONAL

Not to marginalize the terrible earthquake in Japan last quarter, but the effects of the quake and the nuclear power plant issues haven't been as bad on the world economy as we thought it would be. The Japanese people are remarkable in their ability to shake off issues.

The Arab "spring" is another matter however. The fighting all over the Middle East has caused the price of crude oil to remain higher than what it should be. Crude prices hovering around $100.00 per barrel have caused the price of gasoline and the pipeline of products containing crude oil to stay up even in the face of decreased demand. Higher energy and food prices are being felt throughout the world economy. Simple retail demand is down significantly.

NATIONAL

Consumer confidence as measured by the Conference Board was up by 5.6 points to 70.4, continuing improvement from last summer. It will interesting to see what happens as the increased price of crude oil, and thus gasoline, are absorbed into the economy.

The chart above from Martin Capital shows that both the confidence index and sentiment index are still low. I predict that the consumer will not start spending again until both the jobs market and the political situation is changed. Will this happen in November 2012 with a new President being elected?

STANDARD AND POORS DOWNGRADE

S&P lowered its outlook for the federal debt in April, a first for the US debt. The ratings service downgraded US government debt outlook to "negative" from "stable". It said that it has little confidence that the White House and Congress will agree on a deficit reduction plan before the fall 2012 elections and doubts that any plan would be put into place until after 2014.

JOBS

The US unemployment rate was 9.1% in May, up from 8.8% in March and 7.8% when Obama took office. It appears that the recovery from the Great Recession will be longer and bumpier than many had forecast. The Conference Board predicts that the unemployment rate will be 8.5% at the end of next year.

RETAIL REPORT

• Luxury stores had strong sales in May but retailers that cater to the middle and lower class consumer were generally experiencing slumps. The "Dollar" stores were the exception to that. But JC Penny, Dillards and Kohls all missed expectations. The rising prices of gasoline and food were blamed
  
• Pizza Inn is trying a new concept, Five pie pizza co., a smaller and quicker store with one of the first at Montgomery Plaza on West 7th Street in Fort Worth. They only sell pizzas and in one size – 9 inch – but the toppings are many. The company says they will be able to cook the pies in less than five minutes.

HOMEBUILDING

• New home construction in March dropped to a seasonally adjusted rate of 523,000 homes per year. Through the first four months of this year, the rate of new home construction is the worst on record, dating back about 50 years. A huge part of the drop was largely because apartment building plunged over 28 percent. The apartment market had been fairly healthy. With all the foreclosures on single family homes, I have to believe that one of the main reasons multi-family construction went down so far is the lack of financing.
  
• However, more people bought new homes in April than the month before. New-home sales rose 7.3 percent to a seasonally adjusted annual rate of 323,000. But a healthy market would be about 700,000 homes, double the April rate.

TEXAS

• We are almost "safe" again. The Texas Legislature is down to just a couple of issues in its special session. That being said, one bill that was a priority of Governor Rick Perry's was passed and signed into law. Texas now has a "loser pays" provision in its laws. This will allow judges to order that those bringing frivolous lawsuits will pay the legal expenses of the defendant.
• • The states are at war to attract businesses. The Texas Enterprise Fund has handed out $426,129,196 from 2003 to December 31, 2010. It is estimated that the state has received $14.8 billion in capital investment that involved more than 578,000 jobs as a result of the fund contributions.

DFW/NORTH TEXAS REGION

• DFW Airport continues to be in the news. Qantas is coming to DFW and Air Tran is leaving. Qantas began service from Sidney in May and Southwest Airlines bought Air Trans and is moving its service to Dallas Love Field in the fourth quarter.
• The jobless rate in our region was 7.6% in May and the area added 20,200 jobs this year. The state's total net jobs number is up 254,400 this year. DFW added more jobs than any other metro area in April and also had the highest percentage gain.
  
• But even though DFW home foreclosures are down for the fourth month in a row, home prices are still falling. DFW posted a decline of 0.8 percent in March as economists see evidence of a double dip in values nationwide.
  
• Homebuilding is running at the slowest pace in more than 30 years in our area. If the four months' trend continue through the year, the Fort Worth/Arlington area would issue the fewest building permits in three decades.
  
• But foreclosures are also down for the 4th month in North Texas so not all of the trends are negative.
  
• And, in a sign of new life, we have several new homebuilders coming into the area. Now one of the big issues is that there are no new single family subdivisions being developed. So homebuilders are bound to have issues getting product to build on when financing does turn around.
  
• Our office market is also showing slight improvement. According to Grubb & Ellis, the vacancy rate was 22.7%% at the end of the first quarter.

FORT WORTH

• The West Seventh Street area is in the news again. Two new apartment buildings, in new urbanism settings, are planned for the area. The submarket is running near full occupancy, even with all the new product on the street.
  
• Plans have been disclosed for a new development on Lancaster near the Convention Center. A $35 million project with 90 apartments plus shops and restaurants is planned for Lancaster at Throckmorton.

NORTHWEST FORT WORTH/ALLIANCE AREA

• Presidio Junction, which announced a planned Cinemark Theater last quarter, has added a Wal-Mart Supercenter to its lineup. The 300-acre, master planned development of LNR Property is located near the intersections of Interstate 35W, State Highway 287 & North Tarrant Parkway.
  
• Ross Perot's Alliance is pressing further north into Denton County with its residential and commercial growth.
  
• GE announced that it is moving 500 jobs to north Fort Worth to staff its GE Transportation manufacturing facility to build locomotives. The new plant will be located just west of Texas Motor Speedway. The empty building, a $96 million, 500,000 square foot facility will nearly double in size by the second half of 2012. GE will build its super energy efficient Evolution series in the facility.
  
• The development plans for Lake Worth were accepted by the Fort Worth City Council. The 700-acre land use plan sets out what the land around Lake Worth will be used for and includes our Landmark Lakes and Landmark Quebec developments.

SOUTHLAKE/KELLER

• The Southlake City Council approved plans for a new 140 residence portion of Southlake Town Square. The single floor plan units will be built above parking structures and are expected to sell for $250 per square foot.
• Keller's Town Center has not been as successful as Southlake's Town Square. The city was forced to restructure the debt created by the special tax zone last year to avoid dipping into the general fund. The city will have to make up another $236,000 in shortfall from other sources.

MANSFIELD/ARLINGTON

• Methodist Mansfield Medical Center started a $9.1 million expansion of its facility to add a Women's Pavilion. The project will add six labor and delivery suites for a total of 13 and will result in a larger family waiting area.
  
• Arlington Orthopedic Associates is breaking ground on a new 12,000 square foot medical building across the street from Methodist Mansfield.
  
• General Motors is not going to take SUVs out of Arlington. In recent months, GM has gone in search of fresh tax breaks needed to persuade the company to spend $240 million to retool the sport utility facility located in mid-Arlington. The company says it will invest $2 billion in existing plants around the nation in the near future.
  
• Huffines Communities is breaking ground on Viridian, the huge project located in North Arlington. The 2,400 acre mixed use community is planned for 3,500 single family homes, 700 apartments and condos and more than 1 million square feet of commercial space. The homes are planned to sell for $250,000 - $750,000. The development is located directly across FM 157 from a huge landfill. Go figure.

SUMMARY

I think that the economy is improving slightly. Even with new jobs in our region and state, consumer spending is still down because of the higher costs for fuel and food. The restaurants, especially those with big screen TVs, are going to show slight increases in sales in our area this month because of the baseball, hockey and basketball playoffs but that is not the same thing as increased home sales and the resulting spinoffs in Lowe's, Home Depot, Bed Bath, etc. Until we get employment back in line and home sales on the upswing, I believe we are going to be very slow.

That being said, commercial sales transactions are increasing. Many of the banks in our area have decided it is time to quit "extend and pretend". The lenders are putting their troubled assets on the market and taking the write-downs. Once the property is back in the hands of individual owners, deals will be made and the market will get healthy again. We are busy looking at new opportunities while we continue to work our development deals. When the excess inventory of vacant space is filled, the market will start to go vertical again and we can get back to growth.