Why do hot dogs come in a 10-pack and buns are in a package of eight?
Before I answer that deeply philosophical question, I am going to tell you that recent data shows that consumers remain largely employed and continue to open their wallets, but consumer spending is slowing as higher prices dent pocketbooks.
Energy costs have risen nearly 40% year over year, but inflation-adjusted spending on gasoline and other energy has declined by 2.1% year over year. This tells me that consumers are deferring trips or reducing energy use to cope with higher prices. There was a 0.5% decline in real spending on hotels and restaurants, suggesting that consumers are cutting back on some discretionary services. This is not great for commercial real estate, which houses most of those services.
Another factor affecting commercial property owners is the 50% increase (year over year) in Chapter 11 filings. In the first half of this year, a total of 6,252 filings were made, up from 4,411 filings in the first half of 2025. This was despite the extension of the 20% Small Business Deduction, which stopped a massive tax hike on over 33 million small business owners nationwide.
San Diego County continues to see moderate job growth, but alas, at the same time, the labor force appears to be shrinking. San Diego’s civilian labor force fell 1% year over year, or 17,400. Is it immigration enforcement or U-Haul trucks leaving town?
Over all these years in business, I have come to see the real estate market as a three-legged stool.
- Jobs
- Rates
- Confidence
Seems a lot simpler to grow all three than it is.
Nick’s Numbers
With rates elevated, jobs stable and confidence waffling (see chart below), the problem that I see happening is people aren’t borrowing because current rates don’t support current cap rates. So, either rates need to come down or prices need to come down. In the meantime, we wait…
If you would like an analysis of your property’s value or discuss what you should be doing with regard to interest rates or inflation and their impacts on your business, tenants, or property, I’d be happy to talk. (Nick Zech, 858-232-2100, nzech@cdccommerical.com).
If you are interested in an easy listen that also provides a deep dive into the current real estate market, you might want to listen to this podcast with Dr. Peter Linneman being interviewed by Willy Walker of Walker & Dunlop.
Oh ya, hot dogs. Well, hot dog buns come in packs of eight because the buns are baked in clusters of four in pans designed to hold eight rolls. And hot dogs? Well, they have always come in packs of ten. The solution? Buy five packs of eight buns and four 10-packs of hot dogs and invite more people! My prediction though, is through the art of shrinkflation, hot dog packaging will shrink to packs of eight.
While we are on the topic of food and economics, I thought you’d like this story on both…
Suppose that every day, ten men go out for pizza and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men ate at the pizza parlor every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily pizza by $20.” Eats for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still eat for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to eat his pizza. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so, the fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “But he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too … It’s unfair that he got ten times more than I did!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for eats, so the nine sat down and had pizzas without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D., Professor of Economics, University of Georgia