A lot of things are true about the retail industry, but saying malls are a boom town for large, legacy stores certainly isn't one of them. 

The fact of the matter is that malls have been something of a death sentence for stores that take up larger spaces and rely mostly on spillover foot traffic from mall customers to support their bottom line. 

Related: Popular restaurant chain filing for bankruptcy, closing all locations

It's not all due to covid, either. While the pandemic certainly accelerated the decline of shopping malls across the United States, in reality that trend had been going on quite a while before any of us really even knew what the coronavirus was. 

Thanks to a rise in prices, the soaring popularity of online shopping, and a saturation of the market, shopping malls across the country were quickly looking more like something out of a zombie apocalypse movie than the booming, glittery beacon of capitalism more closely associated with the 1980s. 

Of course, with the onset of the pandemic, even more malls started to falter, taking their high-rent tenants along with them. Everyone from mall operators like Simon Property Group  (SPG)  to larger flagships, such as JC Penney and Macy's begin to falter, and hushed words about bankruptcy and store closures echoed through increasingly empty hallways. 

Forever 21 has had a rough several years

One such retailer that struggled through the pandemic was Forever 21, a discount clothing store devoted mostly to younger women. In the 2010s, Forever 21 was beloved for its cheaper than cheap crop tops, sun dresses, and accessories. But as folks stopped going to malls -- and in 2020 when people stopped going anywhere -- sales came to a screeching halt. 

The retailer filed for Chapter 11 bankruptcy in September 2019, shuttering stores and ceasing operations in 40 countries. In early 2020, it sold all $81 of its remaining assets to Simon Property Group, Brookfield Properties, and Authentic Brands, determined to focus more on its central U.S. operations. A month later, it shuttered its stores due to covid.

Forever 21 back from the dead

Since the takeover (which Brookfield has since exited from), Forever 21 has been busy reinventing its name in fast fashion. It's partnered with big name designers like Herve Leger and blockbuster cultural phenomena like Barbie. 

And on April 24, the mall retailer announced it would launch its own bridal line, signaling its intent to diversify away from clothing meant just for teens or the 20-something bar scene. 

The introductory collection features 22 individual styles intended both for the bride and her bridesmaids. Some of the pieces in the line include: 

• Dresses
• Hair accessories
• Swimsuits and lingerie
• Shape wear
• Pajamas
• Cowboy hats
• Jewelry and accessories
• Shoes
• Handbags

The items range in price from $8.99 to $47.99 and sizes from XS to XL.

Most of the items are casual or meant to cater to wedding-adjacent activities, such as bachelorette parties, wedding showers, receptions, and more casual ceremonies. 

Bridal seems to be the future for more than one mall retailer. Earlier in 2023, Abercrombie & Fitch  (ANF) said it would launch its own bridal line, featuring a line of about 100 dresses and accessories with a price range of $70-$200.

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Monika DeRoussel was in a meeting, away from her phone and email, when a client messaged her that a property in their price range and desired neighborhood had a for-sale sign in the yard. When the meeting concluded, DeRoussel quickly reached out to the seller’s agent to see if her client could get in for a tour, but it was too late.

“I called the listing agent and it was listed three hours ago, but it was sold,” the Cincinnati, Ohio-based eXp Realty agent said. “We couldn’t even see it. There is no way you can stay on top of things unless you hire someone to watch new listings pop up every 10 minutes.

“And it was a solid cash offer, no contingency and was going to close within a week. It is so hard to compete with that.”

While DeRoussel’s experience sounds exactly like many of the stories that emerged from the pandemic-fueled homebuying frenzy of 2020 and 2021, this happened just a few weeks ago in early April 2024.

“It is extremely competitive,” DeRoussel said of the Cincinnati housing market. “We wrote five offers this weekend and out of five, four were rejected. Buyers are really struggling.”

According to data from Altos Research, the Cincinnati metro area (which includes portions of Ohio, Kentucky and Indiana) currently has a Market Action Index score of 54, while the state of Ohio has a score of 55. Altos considers anything above a 30 to be a seller’s market.

“Cincinnati is a great place to live,” said Julie Back, the executive sales vice president of Sibcy Cline Realtors. “The cost of living is low, it is a fabulous city with all the big city amenities — we have all the arts, the culture, so many Fortune 500 companies. … It is a wonderful area of the United States and people are starting to realize it.”

Although there is no doubt among local real estate professionals that demand is high in the Cincinnati housing market, agents say the area’s low inventory situation is only adding to the challenge facing consumers.

As of April 19, the Cincinnati metro area had a 90-day average of 1,864 single-family active listings, according to data from Altos Research. Although this is up from an all-time low of 1,429 active listings in early May 2022, it is down from the 3,021 listings recorded in late April 2020, a little over a month into the COVID-19 pandemic.

Additionally, while the number of new listings hitting the market each week in the Cincinnati metro area is certainly on the rise — jumping from a 90-day average of 214 in late February to 252 in late April of this year — the number is still well below the average of 367 new listings recorded in late April 2020.

“I think a lot of it has to do with there are just fewer houses available,” said Mark Meinhardt, a senior vice president at Sibcy Cline Realtors. “Baby boomers are not moving. They are staying put in their houses longer, plus you have a rate-lock effect. The interest rates are a huge factor.

“There are so many people who made a decision in the past 24 months to improve their house rather than move because it didn’t make sense with the interest rates unless they had to. So, they are just hunkering down.”

Looking further into the spring and summer months, agents are optimistic that more inventory will hit the market, but they do not believe it will be enough to satiate demand.

“We are going to see an increase in inventory. Cincinnati is a very predictable market since it has a lot of families,” DeRoussel said. “The typical Cincinnati consumer decides to list their house right before school gets out with this idea that they will sell their house, go on vacation and then move into their new house. So, we are expecting an additional two or three listings to hit the market each week now, but it is still extremely low.”

As would be expected, the tight inventory and high level of demand frequently results in bidding wars that drive up home prices. Data from Altos Research shows that the 90-day average median list price for single-family homes in the Cincinnati metro area has risen from $284,800 in April 2019, prior to the onset of the pandemic, to $389,250 as of April 24, 2024.

“I have some families that bought houses four or five years ago for $225,000, and they want something bigger and are excited that they can sell now for $300,000, but their budget for the new house is $350,000,” DeRoussel said. “With that budget, they aren’t really moving up. They are just getting the same house and maybe not even in as good of condition. If you want to move up at that price point, you have to be able to look at something that is like $500,000.”

Agents say they are also seeing a lot of appraisal gap clauses, inspection waivers and free leasebacks popping up in offers as buyers look to improve their chance of winning a house in the current market.

But rising prices are not the only financial challenge buyers are having to contend with right now. In addition to keeping prospective home sellers in their houses longer, higher mortgage rates are also taking a toll on buyers.

“Interest rates being higher hasn’t really necessarily slowed down demand,” Meinhardt said. “But buyers have had to adjust their expectations or their strategies when it comes to mortgage financing.”

Meinhardt and DeRoussel also noted the large number of investors currently active in the Cincinnati housing market. They are also making it hard for owner-occupant buyers, especially those looking in the $500,000-and-under price points.

“We are seeing a lot of investors and some flippers, but others are buying and holding,” Meinhardt said. “I think within the Midwest, our prices are certainly more conducive for investors than on one of the coasts. But it is really hard for those first-time homebuyers at the lower prices because they are competing with both institutional and mom-and-pop investors.”

Despite the challenges, local agents feel that things will continue to heat up as the market moves further into the spring.

“We are just getting fired up,” Back said. “It is not going to slow down. You are just going to have to learn to deal with it. Bankers are getting their interest rates, sellers are getting their prices and buyers are learning to step up to the plate.”

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Growth in the U.S. economy slowed notably last quarter as consumers tightened their belts and companies ran down inventories amid concern about a broad slump in demand over the coming months.

The world's biggest economy expanded by an annualized rate of 1.6%, down from the 3.4% pace recorded over fourth-quarter 2023, data from the Commerce Department showed on April 25. The latest figure was well south of Wall Street's 2.5% forecast. 

Perhaps more worrying for both government officials and policy makers at the Federal Reserve, however, was the parallel spike in inflation pressure, with the central bank's preferred gauge rising by a faster-than-expected 3.7% over the three-month period.

Mike Reynolds, vice president of investment strategy at Glenmede, says President Joe Biden might need to accelerate government spending, "as is typical in years when a sitting president seeks reelection." The idea would be to offset the impact of the Fed's elevated lending rate, which currently sits at a two-decade high of between 5.25% and 5.5%.

"Another positive GDP print adds another notch to the belt for the soft-landing argument, though the risk of recession still remains higher than normal given the tight stance of monetary policy," he said. 

"Fiscal stimulus has, so far, provided an offset to monetary-policy headwinds and is likely to continue to help broaden the pathway to soft landing." A soft landing for the economy would show slowing inflation but no recession.   

But the overall leap in price pressures followed a series of warnings from Fed officials over the past few weeks that they're still seeking "confidence" in the notion that inflation is heading back toward the central bank's preferred 2% target. 

And that has markets even more concerned. 

'Stubborn inflation and stifled growth': Stagflation 

"It’s one thing to have moderate inflation with above-average growth," said Bret Kenwell, U.S. investment analyst at eToro. "It’s another thing to have stubborn inflation and stifled growth, which has to be the Fed’s top concern at this point in the rate cycle." 

Slowing growth and faster inflation raise the specter of stagflation in an economy that, given its reliance on consumer spending, can be significantly damaging.

“Stagflation is a growing risk after GDP missed and the price index surprised to the upside," said David Russell, global head of marketing strategy at TradeStation. "If inflation isn’t getting better with such a weak growth, you have to wonder if the trend toward lower prices will continue." 

Related: Wall Street faces make-or-break week with Tesla, GDP, inflation on deck

"The bump in [Treasury-security] yields after the report suggests rate cuts are increasingly in doubt,” he added.

Yields on benchmark 2-year notes, the most-sensitive to changes in interest-rate forecasts, rose 9 basis points (0.09 percentage point) following the GDP and inflation data to change hands at 5.014%, their highest since last November. Ten-year yields hit a fresh five-month peak of 4.731%

Rate traders also responded to the Commerce Department data by pushing back their forecasts for a Fed rate cut until at least November and possibly beyond. They also pared the number of rate reductions expected this year to just one.

A speed-up in Q1 inflation has now delayed the first, and only cut this year to December pic.twitter.com/slqfFPa2qc

— Ole S Hansen (@Ole_S_Hansen) April 25, 2024

"The hot inflation print is the real story in this report," Fitch Ratings analysts wrote. "If growth continues to slowly decelerate but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach." 

The odds of a June rate cut, a virtual lock earlier this year, have collapsed to just 9.4%, based on data from CME Group's FedWatch. None of the four Fed meetings between July and December indicate a higher than 45% chance of a quarter-point reduction.

Sharper consumer-spending slowdown?

Jeffrey Roach, chief economist for LPL Financial in Charlotte, says details of the first-quarter GDP estimate suggest a weaker growth rate on the horizon. But he sees inflation pressure moderating at the same time.

"The economy will likely decelerate further in the following quarters as consumers are likely near the end of their spending splurge," he said. "Savings rates are falling as sticky inflation puts greater pressure on the consumer."

"We should expect inflation will ease throughout this year as aggregate demand slows, although the path to the Fed’s 2% target still looks a long ways off," Roach said.

Related: No landing, no Fed rate cuts: the markets' new bet on 2024

Ian Shepherdson of Pantheon Macroeconomics agrees that pandemic-era savings have largely been depleted. He noted that "only the very wealthiest households still have substantial excess that can be tapped to support consumption," which also leads to slower consumption over the back half of the year.

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He also argues that this should help blunt inflation pressure, as wage gains moderate and year-on-year comparisons support lower overall readings.

"It’s a close call, but we still see a path to the first Fed rate cut in June if, as we expect, the next two labor-market reports show job growth is slowing markedly and the [consumer-price index] reports are benign," he said.

The Bureau of Economic Analysis will publish its March PCE inflation report on Friday, April 26. Analysts are looking for a core and headline reading of 2.6%, down from 2.8% and 2.5% respectively over the month of February. 

Related: Veteran fund manager picks favorite stocks for 2024

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