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Where, Oh Where, Have My Looky-Loos Gone?

by | Jul 15, 2022

I once participated in a “mall sit” that forever changed my perception of consumerism. If that sounds vaguely erudite and radical, it most certainly was. The “mall sit” consisted of spending 10 days in the backcountry wilderness, the last three of which you were entirely solo, with little to no food. At the end of your “solo trip” you were dropped off at a large shopping mall and tasked with sitting for half a day and writing down your observations. If that sounds nuts to you, it most certainly was.

My big revelation during the mall sit was how much the activity of shopping and eating was disconnected from actual need. Of course, there were people there who I am sure were purchasing specific items that they needed, and probably a handful of people in the food court who were experiencing real hunger, but they were the minority. The mall was, for most, something to do on a Saturday. It’s a cultural thing. We spend money to alleviate boredom.

I think about the mall sit every time I desperately want to step outside of something I have taken for granted or grown complacent to. I think of the mall sit when I want to look at things from a different perspective. I think of the mall sit when I think about consumer behavior. What is perceived value? What is needs based versus opportunity driven? How do cultural norms and media influence affect our relationship to money?

Every month, Fannie Mae publishes something they call the Home Purchase Sentiment Index (HPSI). The survey consists of questions aimed at assessing consumer sentiment toward owning and renting a house, the current state of their household finances, and overall confidence in the U.S. economy. Using a relatively small sample size of 1000 households, the research team calculates the HPSI score based on the average of the net percent positive responses to each of its questions. For example: “Do you think this is a very good time to buy a house, a somewhat good time, a somewhat bad time, or a very bad time to buy a house?” 1) Very good time 2) Somewhat good time 3) Somewhat bad time 4) Very bad time 5) Don’t know.

June’s HPSI number was, not surprisingly, low. At 64.8, it was the second lowest number reported in a decade. Only 20% of American households surveyed said they thought now was a good time to buy. 81% said that they thought the economy was on the “wrong track.” (Read the entire report here.) This low confidence majority is despite the fact that mortgage rates have actually gone down over the last few weeks and there were 372,000 jobs added to the U.S. economy in June.

Q2 housing market reports came out last week and for better or for worse the data reflects the same sentiment as the HPSI. The NYC market, which has lagged behind the rest of the country in declining sales volume, saw a 30% drop in June (YoY) in new contracts. That’s a confronting data point for all of those starry-eyed, aspirational sellers out there. Demand is indisputably down.

The Q2 data confirms what we have already observed. Gone are the days of packed open houses and bidding wars. Even the looky-loos seemed to have found something better to do on a Sunday. The mall has cleared out. Shoppers are still there, but not as many. Some of them have cash to burn. Others have a real need or purpose. If I’m a shopkeeper right now, or a salesperson, I’m laser focused on what these highly motivated buyers want and what their perceived value of the product I am selling right now is. If I am a residential real estate agent, I’m looking for some mall sit perspective. I’m climbing a mountain, hopping on a train or a plane, gazing at the horizon, walking aimlessly on a hot summer night, doing whatever I have to do to figure out what my next move is. The market has shifted. It’s in the rear view mirror now. What is your clear path to the future?

Until next week,

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