Wednesday, May 16, 2007

This is getting interesting to me. Events in the housing market are proceeding almost exactly the way I would've thought they would. The statistics about housing that are coming out in the news seem to me to be pretty clear and unequivocal.

Which is a bit of a surprise.

I was sure the situation would stay muddy and unclear a bit longer. See, whenever a bubble pops in my business, it takes a long time to become clear . Most of the information isn't public; stores don't want people to know that sales have dropped, for fear that it's only them and that the customers will think they're losers; manufacturers don't proclaim that sales have dropped, because they're afraid everyone will stop buying; customers don't want to believe that sales have dropped, because those who are still buying don't want to be the last fool.

So, generally, if the Beanie Baby bubble or the pog bubble or the Pokemon bubble is popping, you have to try to figure it out yourself from insufficient and inaccurate information. It can appear for awhile that other stores are doing better than you. All you can really do is look at your own sales, and gather gossip and anecdotal evidence, and hope you're right. But there is always doubt.

But if you wait until it is clear and obvious, it's too late to do anything.

The housing market is publicly reported, so all the spinmeisters can do is put the statistics into misleading contexts, which can be easily brushed aside. For instance, the data that housing starts went up 2.5% last month is total BS; it went up from a very poor March. In my business, I don't even bother to compare consecutive months because its completely meaningless. Because of seasonal differences, it would be pretty stupid to compare December sales to January sales, for instance. The statistic that counts is the comparison to the same month a year previous, which I believe they said was about a 25% drop. That plus cancelled building starts at the time of year where you'd normally see an increase.

Not starting houses or selling houses in the spring, is like not selling merchandise at Christmas. Tis the Season.

Or Home Depot can rationalize their 25% drop in sales to weather. Which is pretty lame, since weather happens. So you can say its too hot or too cold; too wet or too dry; etc. But since it happens every year, its a really lousy excuse.

And so on. None of the news is good; exploding inventories, lower prices, lower housing starts, rising foreclosures; and so on.

It follows that some people are going to lose their jobs; others are going to cut back on their spending.

So what it really comes to to for me is -- when is it going to affect my sales? When is the full effect going to hit Bend, and even more importantly, when is it going to become common knowledge and wisdom? Will it keep the tourist from coming this summer? Will it keep customers from spending this Christmas?

I'm betting so far that it will take at least until the end of the year before it reaches my neck of the woods. And I have quite a bit of flexibility in my budget so that I can go back to the drawing board sooner, if I need to.

Like I said, I'm pretty amazed that things are proceeding in such an unambiguous and logical manner. And that means Bend is going to be absolutely hammered; maybe even worse the biggest bubble Bear expects.

But it still leaves me with some decisions to make about when to cut back.

It's a matter of timing. Cut my inventory too soon, and I might lose a lot of sales and possibly customers. Cut my buying too late, and all the profits could be eaten up.


dkgoodman said...

Home Depot has been repeatedly investigated for its shoddy home repairs. CBS news in Los Angeles has done several reports on them, but I never see anything about them in our local news, nor in the reports of their income drop.

Duncan McGeary said...

Actually, I understated the drop. It was 29% not 25%.

The same section of the paper that announced the drop, also mentioned that Lowe's had decided to open a store in Redmond, afterall.

The kicker is, they changed their mind because HOME DEPOT WAS OPENING in Redmond.