“Housing Starts” Curb Affordable Luxuries: the Venti of Economic Indicators
‘œStarbucks 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.
Do you think lattes are an accurate economic thermometer? What about steak? Is the current credit crunch the real culprit or should we be blaming gas prices?
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!
We’re still spending about the same at Seattle’s Best Coffee (in Borders), 2 dates per month. But that’s our sanity/date/fun time. However, we’re trying to cut back a little bit on other expenses for our holiday gas. We should have plenty of room in the budget.
I’m spending about the same. But the Xmas is a line item in my year round budget anyway.
I’m battening down the hatches trying to pay off my home equity line and increasing saving. I’m moving some of my retirement funds in my Roth IRA into TIPS.(*) I expect either a burst of inflation or soaring interest rates soon. Given how much debt I have in my fixed rate mortgage I’m hoping for the latter if it hast to be one or the other.
Between the rise in the price of oil, the fact that no anti-war candidate seems to have a chance in the presidential election, and the fall of the dollar I see a lot of inflationary pressures as built in to the next few years.
(*) It is better not to put TIPS into an ordinary IRA or 401(k) if you have a choice because if you do the money is taxed on withdrawal as ordinary income. Since TIPS are exempt from state taxes you lose that advantage unless they are in a Roth IRA.
My partner and I now have 3 mortgages that we are responsible for. Until we either sell or rent these houses, we won’t be buying any lattes….okay, we won’t be buying as many lattes. 🙂
I can count on two hands the number of times I’ve patronised Starbucks…or any other High End Coffee seller for that matter.
I’m a Tea Drinker and a Mr. Coffee Iced Tea Pot is up there with Spoons, Forks, and Knives as one of the worlds great inventions.
But for the record…and its just my Frugal Nature…I greatly cut down the number of drinks I buy when I’m out when the price exceeded $1.
Usually I just get Water…and NOT Bottled..that I REFUSE to pay the price for.
I bought a 1 Liter Stainless Thermos for around $30 off Amazon and fill it up in the morning with Iced Tea…If I don’t buy Two $1 Sodas the Payback time is TWO Weeks.
Being Brash (or Eccentric..}:~D) helps too…the McWorkers in just about any Restaurant except the High End ones could care less if you refill you water glass from a Thermos.
~ Roland
Mrs. Micah, Plonkee and FrugalZen: Your responses are in line with what I’ve come to expect from all of you. You buy and consume only with intention, so the economy has less impact on your day-to-day expenditures. I respect this!
Jim Merkel, the author of Radical Simplicity, suggests that every time I buy something, I should ask myself this question: How might this expenditure change if I didn’t have to work for a living? He believes that many of us find ourselves buying things to make our work-lives more tolerable, like that cup of Starbucks for the morning commute. I think he makes a great point!
Larry: I agree… inflationary pressures will hurt all of us in the next few years. You’re being smart in your methodical approach to wipe out that debt.
Phil: I hear ya with the multiple mortgages. I have a vacant rental and it definitely is a strain on the cash flow. I look it as a short term loss since in the end, it leads to a long term gain where plenty of lattes will keep us company in our retirement.
In this week’s Carnival of the Insanities.