A recent USA Today article uncovers a correlation between a decline in electronics sales and housing prices. They essentially bumped NPD research on electronics sales with National Association of Realtors data.
My first thought was a rather unenlightened one: “no duh.” I just figured that whenever there was any sort of economic downturn that you’d likely see some sort of contraction in these mid-to-high level products. But I read on and found the following:
Nearly every area with a decline in electronics sales also had falling home prices, says NPD analyst Stephen Baker. That’s a big change. Unlike many other products, electronics sales have weathered all downturns in recent years. U.S. sales rose 72% from 2000 to 2007 — a period that included the dot-com bust, says the Consumer Electronics Association, a trade group.
So even during the dot-com bust and 9/11 they saw electronic sales increase. Could it be that electronics sales are a leading indicator of home prices? I’m dubious to a certain degree. The evidence here shows a strong correlation but not causality. It makes a lot of sense mind you, and I tend to agree, but one quarter doesn’t make a trend and consumers seem all to ready to take out the plastic despite financial position.
That said, could we be seeing a change in how people are dealing with credit? Have ‘house poor’ homeowners, as a growing segment of society, now been forced to change their spending behavior? There has been speculation that the subprime meltdown (and the housing bubble in general) could spill over into other markets.
Essentially, to make the mortgage payment, consumers default on car payments or credit cards and simply don’t consume nearly as much as they used to. The latter item in particular would have a big impact (negative) on our economy and might add an accelerant to the falling housing market.
Time will tell – so take your time!
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