How Housing Affects Your Sales

Brace yourself. The good times are about to stop rolling.

The real estate market has stopped expanding. Some economists are predicting the bubble will burst. Others predict a soft landing. But any way you cut it, the bubble has stopped growing.

The inventory of houses in the hottest growth markets continues to grow. A year ago in the hot zones houses sold in less than thirty days. Today the average home in those communities stays on the market for at least six months, and the number of months is growing.

Next step? Homeowners will decide they can’t make a seventh mortgage payment on the old place, and will start dropping price to promote a quicker sale. It won't take long before everyone is forced to drop price.

Then there are those interest-only loans that people used three years ago to buy more house than they could afford. The loans were short-term, and converted to a conventional principal plus interest loan about... well, about now. That means a much higher house payment - a payment that many of them will no longer be able to afford. In markets like San Diego and Las Vegas the repossession rate is already growing at an alarming rate.

Why am I talking about real estate in a marketing column? Because Americans are a peculiar people. Each time we determine that we’ve improved our net worth, we spend about 10% of it.

For the last six years, American homeowners have spent with reckless abandon as they perceived growth in their homeowner’s equity. They didn't spend actual cash, but rather added to their credit card debt. The growth has stopped. The debt remains. Consumer optimism is about to screech to a halt.

Soft landing? Bubble burst? Doesn’t matter. Without upward motion in real estate consumer spending is about to change abruptly.

What will you do when consumer optimism ends?

How are you going to attract new customers to your business when they’re afraid to spend?

Why aren’t you doing that already?

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