“Housing Starts” Curb Affordable Luxuries: the Venti of Economic Indicators
“Starbucks represents something beyond a cup of coffee.” – Howard Schultz
Back in college (circa 1986), I was hired one summer by a small marketing firm in Ohio to do research on housing starts. Even though I was majoring in marketing and had just completed a Statistics and Research Methods course the previous semester, I didn’t quite get the point of what I was doing or the firm’s fascination with housing starts. Here’s the Wiki definition:
Housing Starts are used in the United States of America as an indicator of the state of the economy. Housing Starts are the number of privately owned new homes (technically housing units) on which construction has been started over some period. Housing starts are an important economic indicator because they show how much money the general public has. If there is a rise in housing starts it likely means there is more money in the economy.
Roger was the owner of the firm… his look was a cross between John Malkovich and Ed Harris. No reason to bring this up other than to provide a visual. He was bald and had this obsessive way of constantly rubbing his head, making it seem as if there was something sexual about this repetitive motion. Perhaps it was my 19-year-old hormones raging and I was just transferring my pent up eroticism on his nervous quirk. That was my one big memory about this job that summer.
I remember little if anything about the housing research except that Roger had this idea for a side business. He wanted to publish a newsletter (this was pre-Internet) that provided research on housing starts for people that managed their own stock portfolio. Roger had a marketing firm, but his first love was managing his money. It’s a given that he probably became a day trader after it was enabled by the Internet. But back then, he had to call in his trades to his stockbroker. And he was on the phone a lot.
He said there were many people like him that would pay money for this research (meaning all the monthly stats available on housing starts) if it came in a consumable format. He envisioned a 2-page newsletter with a yearly subscription fee of $49.99. It seemed like a great idea but it never got off the ground. The project fizzled after I went back to school that fall.
But I always think of Roger when I read about housing starts. I’m thinking of Roger often these days.
Robert MacIntosh, the chief economist at Eaton Vance, the fund manager in Boston, was quoted in The New York Times yesterday about how this relates to retail sales with the approaching holiday season. He indicated:
Quite clearly, the housing sector is in a recession and that’s taking a big chunk out of the ability of people to have cash to spend.
The article reported:
A Bloomberg News poll of economists forecasts that the report on October housing starts will show a decline to an annual rate of 1.170 million from 1.191 million in September. A decline is also seen in building permits, to a 1.190 million annualized rate from 1.226 million.
Twenty years ago, Roger would be including this type of detail in his newsletter. Maybe he’d also introduce a new one called Curbing Lattes. Why? Well, Starbucks recently revealed that customer visits fell in the third quarter. As reported by the Los Angeles Times, this had never happened before. Quarter after quarter, Americans consumed more pricey Starbucks mixtures than the quarter before. Until now:
Many Americans are cutting back on affordable luxuries such as fancy coffee beverages, said Howard Penney, an analyst with Friedman, Billings, Ramsey & Co.
What about you: Are you buckling down on household expenses as we enter the holiday season? What are you doing these days with your disposable income? Are you saving more? Or do you just have less to spend? As usual, comments welcomed below!