I have a friend named Sheila. (I don’t, but whatever).

Sheila has a great job. Enough to get by with a few perks.

She pays her taxes. Good job, Sheila.

She subscribes to Netflix and 15 other media outlets.

She has a family and they go on a nice vacation once a year.

Sheila’s really big into fitness. She goes to a gym and three times a year enters a marathon. Go Sheila.

She likes nice things. Every four years Sheila trades in her car.

She’s a sucker for Reese’s in the grocery check-out line, and who can blame her? ‘Peanut butter and chocolate are a marriage of the heavens’ as she looks down at her son who also wants a treat. Why not? You only live once!

Sheila and her partner save money in a 401k and between that and their home they are feeling pretty confident about their retirement. After all, they need to put two kids through college, so a lot of their saving focus is on that. Well, and the giant TV her partner Greg has got to have so he can watch golf as much as humanly possible. It’s okay to splurge. Greg is a great dad, with a pretty good job, too. You can’t “live to work,” he tells the kids as he packs up for the boy’s weekend away. They do that quite a bit. At least twice a month. Greg likes to work hard and play hard. He’s into kitesurfing, skiing, and will pay for whatever gets the adrenaline going.  

Greg likes to look good though. You wouldn’t put it past him to throw down on a sweet watch.

Greg’s focus is on his family when it comes to money. Like Sheila, he looks at the big picture, but he does the bills. At last check, the operating expenses were running a touch high. They are probably one bad fridge away from the credit card being on max. It’s fine. They’ll deal with it. They have great jobs. It’s fine. Life is great.

Okay, that’s an incredibly simplified, so badly stereotypical version of a confident consumer. 

“Consumer confidence is an economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. If the consumer has confidence in the immediate and near future economy and his/her personal finance, then the consumer will spend more than save.”

So, what happens when a consumer is not confident?

Here is the same story of an unconfident Sheila and Greg. This is how they might think of themselves. 

I have a friend named Sheila. 

Sheila has a great job. Enough to get by with a few perks.

She pays her taxes. Good job, Sheila.

She subscribes to Netflix and 15 other media outlets.

She has a family and they go on a nice vacation once a year.

Sheila’s really big into fitness. She goes to a gym and three times a year enters a marathon. Go Sheila.

She likes nice things. Every four years Sheila trades in her car.

She’s a sucker for Reese’s in the grocery check-out line, and who can blame her? ‘Peanut butter and chocolate are a marriage of the heavens’ as she looks down at her son who also wants a treat. Why not? You only live once!

Sheila and her partner save money in a 401k and between that and their home they are feeling pretty confident about their retirement. After all, they need to put two kids through college, so a lot of their saving focus is on that. Well, and the giant TV her partner Greg has got to have so he can watch golf as much as humanly possible. It’s okay to splurge. Greg is a great dad, with a pretty good job, too. You can’t “live to work,” he tells the kids as he packs up for the boy’s weekend away. They do that quite a bit. At least twice a month. Greg likes to work hard and play hard. He’s into kitesurfing, skiing and will pay for whatever gets the adrenaline going.  

Greg likes to look good though. You wouldn’t put it past him to throw down on a sweet watch.

Greg’s focus is on his family when it comes to money. Like Sheila, he looks at the big picture, but he does the bills. At last check, their 401k has dropped significantly. He wonders if he should take their money out of stocks and put it into something safer like bonds. They still have their same jobs, but the news is saying that home values will drop, and we are going to be in a recession. Greg and Sheila decide to decrease all spending until the “market turns.”

Again, this is over simplified so that I can paint an easy picture. Here’s what you need to know about consumer confidence. It’s not based on facts. It’s based on the emotions of consumers who often do not get all the information they need to make decisions and consequently begin making a knee-jerk reaction to the limited information they receive.

Let’s keep things very broad for a little longer so we can see the impact of what decisions were made inside of Greg and Sheila’s household on a bigger scale. Let’s say 50% of the Greg and Sheila’s of the nation start doing the same thing.

• Stop putting money into the system by purchasing goods at the same rate

• Realize the loss in the stock market by selling stocks and buying bonds

• Reduce their activity in the tourism industry

• Reduce their activity in the service industries

• Begin to stock-pile money in bank accounts and decrease the flow of money in the system

Look, I’m no economist (please consult one with questions), but I do know that in order for an economy to work, money needs to flow. Sheila needs to buy the coca cola for her son in the grocery line, so that guy that works at the cola plant can stay employed, so that he too can buy the car, to keep that lady who creates the dye mold to manufacture car hoods employed, so that she can go home and plan that all-inclusive trip, so that the airlines can purchase oil, so the index can stay high, so that Sheila and Greg’s 401k can stay secure and we can all be happy in our jolly little lives.

A break in the chain, creates a larger impact.

A break in consumer confidence, is a break in the chain.

Okay, let’s huddle in, folks. Why do you even care and how am I going to help your business right now? You, as a Realtor, have at your disposal an incredible amount of power and positive information that is not being passed through to the consumer in the news. There are not a lot of reports or stories about the families that are buying and selling right now are there? The picture to be painted is of devastation because that makes people click on that headline. (This is not to be insensitive to the public health crisis of COVID-19 and my heart truly goes out to those who have been affected by this pandemic).

If we know:

a) Consumers are behind in their knowledge of the market.

b) We do real dumb things when we get scared of a “market turn.”

c) We KNOW we are NOT receiving all the information, only the negative.

d) Does it not make sense to make sure that the good news gets out there, too?

The consequence is a snowball effect as demonstrated above. If you think things are bad now in this self-created recession for the good of human health, if we let consumer confidence drop, we’re in a whole other ball of wax.

Your mission, should you choose to accept it is:

1. Do a data report of your area. 

2. Feel free to be as detailed as you’d like. 

3. Pick up the phone.

4. Call someone in your database.

5. Share said data.

6. It’s that simple.

Other ways to share:

• Digital newsletters

• Letter writing

• Instagram stories

• Instagram TV

• Facebook Live

• Facebook Stories

• LinkedIn

(Do I need to keep going?)

At minimum, the data you should be pulling are:

• DOM – Days on market. This speaks to the narrative of how swiftly homes are or are not going under contract in your area.

• MOI – Months of Inventory. This speaks to the measurement of demand. More inventory, lower demand. Low inventory, high demand.

• Median sold price – This speaks to the benchmark in your market. Your CMA will decipher if your client’s home is above or below this.

• Market Trend Report – You can run this report to learn how the last 12 months have been doing. Look at January, February, March, and April. What story is it telling that you can speak to on your calls?

Start being the positive (and true) storyteller in your community about your market. Know that you are going to set someone at ease by translating the news that we will find ourselves on the other side of this stronger and better.

Your future client, and the strength of our market depends on us to be the voice of reason in times like these. The proof is in the pudding, so make sure your claims of market strength are founded in the data. Let me know if you have questions about consumer confidence. Leave a comment below.

Until then, chin up, keep your feet moving … and burn the white flag.

sz

Copyright 2020 - Shelley Zavitz Realty