What it shows is the average size of new single-family houses in the US. And what it tells us is that median and average floor areas are falling. They are now roughly back to where they were in 2010, following the 2007-2008 financial crisis. This is noteworthy because it shows that homebuilders are responding to lower affordability. Interest rates went up, buyers can now afford less home, and so the market is responding by shrinking square footages to reduce sticker prices. It is the same reason that condominiums also tend to follow a similar size trendline (at least here in Toronto); it's about affordability. That said, if you go back even further in the above chart -- to 1999 -- the trendline is up and to the right. Meaning that when the market allows, the average new single-family house is generally getting bigger. That also tells us something.
Amazon was founded in 1994 and went public in 1997. By 1999, some 5 years after the company was started, only about 1% of total retail sales were being done online in the US. So you have to give it to Bezos, he saw what was coming and he got in early to help create it. This was not so obvious back in the mid 90s. The internet as a whole was still being viewed with skepticism, especially after the dot-com bubble.
Today, online shopping represents over 15% of total retail sales. (See above chart from Charlie Bilello.) The pandemic pop is over, but it looks like we've returned to a pretty clear trendline -- up and to the right. I guess the questions now are: When and where does this start to flatline? It doesn't seem likely that this goes to 100% in the foreseeable future, especially if you include grocery. But it's going to go a lot higher.
For myself, if I were to exclude food/grocery, I would say that the vast majority (80-90%) of my retail purchases are done online. Even if I'm in a physical store, I'll often pull out my phone to price compare. If it's cheaper on Amazon, I'll just order it there.
Here's another example.
This past summer when I was in Park City, I discovered the brand Vuori. I had heard of them before, but I had never actually seen or touched their clothes. It's great stuff. But instead of the store convincing me to buy something, it convinced me that I like the brand and that I should probably shop on their website at some point in the near future. And that's exactly what I ended up doing. (Sorry Lululemon. You're still my favorite.)
All of this is perhaps obvious in a world where 15% of total retail sales are happening online. But I would imagine that the retail landscape and our cities will look very different when this number goes even higher. Our cities were different at 1% compared to today at 15%; so imagine what 50% or 80% might be like.
Charlie Bilello shared this interesting housing chart in his weekly newsletter:
Shelter is one of the largest components of the CPI index (about a third). And at 7.9% (see above), this is the highest rate of housing inflation since 1982. However, the shelter component -- which is largely a combination of rent on a primary residences and the implicit rent that owner occupants would pay if they were renting their homes -- has historically been a lagging indicator. Apparently it has something to do with the way that it's calculated. So for this reason, the shelter CPI has only increased 14.9% since the start of 2020, whereas home prices nationally increased by about 40% and rents increased by about 20%. It's also why there appears to be a disconnect (in the above chart) with rents. All of this is to say that we might see shelter jump up a bit further as it continues to record what happened over the last few years.
