Bill Matthies

A Down Real Estate Market Equals CE Sales Opportunity
October 31, 2007

Under the heading of silver linings in dark clouds — if you sell home AV product and installation service, there is opportunity for you in today’s depressed real estate market.

First the bad news:

As you know, sales of existing homes are in the tank, down an average of 23 percent nationally, down as low as 31percent in the West comparing September 2006 with 2007. In 2004, 2005 and 2006, the average month’s supply of unsold inventory never went above 6.5 months (2006) and was as low as 4.3 months in 2004. As of September 2007, it was 10.5 months, having increased every month in the year. Even worse, things will probably get worse before they get better. While some of the downturn is due to a much-needed market correction, the trip wire that started it all is the sub-prime crisis, and according to a recent Moody’s study, less than 1 percent of surveyed borrowers who are facing a rate reset have had their loan reworked.

The consequences of this are many but not all are bad. 

Now the good news:

Many who had planned to sell their homes will not do so now, given the drop in average selling price for existing inventory that parallels slow sales. Unfortunately, many of these are that 99 percent who have an un-adjusted variable sub-prime loan and who are in no position to do anything, not to mention buy new A/V equipment. 

However, not everyone is in that boat. A greater number are those who will now improve their homes with everything from pools to patios, furniture to fixtures, and there is no reason that list should not include extensive home A/V upgrades as well. Indeed, CEA’s 14^th annual CE Holiday Purchase Pattern study forecasted 7 percent growth in the fourth quarter this year over last, totaling more than $48 billion in sales. 

Is that good? Well the equivalent number in pre-sub-prime crisis 2004 was 5 percent growth on a smaller base. 

It is good and it’s is evidence that in a down real estate market, people put money into their homes. However, it does not necessarily follow that they will automatically buy A/V. They could just as well put the money into carpeting or a new bathroom. If you are to get your fair share, you have to go after it. You have to tell them why it is the best time ever to upgrade what is arguably at the center of their home life. Better A/V throughout the home is good for the consumer, not to mention your business.

Posted by Bill Matthies on October 31, 2007 | Comments (0)