Economic Woes Reveal a Long-Felt Unease

In the last post, I promised that my nextt post would talk about companies that have productively connected with the contemporary zeitgeist. However, I came across an Associated Press article that I wanted to share with my readers because it does a good job of describing the zeitgeist from an economic perspective. (I’ll keep my promise in the next post barring some other development that sets it back once more.)

The article begins:

Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction. True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn't feel right, even if they couldn't quite explain why.

Far be it from me to wantonly depress this blog's devoted readers, but as each week has passed since the beginning of 2008, the volume of warnings about a sustained economic downturn has progressively grown. We can deny the seriousness of this downturn in a quest for insulation from worry. Or we can bite our lip, dig in and earnestly try to learn all we can about what is shaping the economic future so that whatever happens, we are better able to cope.

Housing is at the center of the storm that is battering that economy. Housing has traditionally led the nation into economic downturns and this time it is no different. What is different this time, however, is that demand will not materially increase during the current economic downturn as it has always been the case in past downturns. The reason is that the age cohort that accounts for most home buying (30 -44-year-olds) is shrinking in size. In other words, don't believe those who say that we're in just another cyclical downswing, and that soon housing prices will resume an upward spiraling that makes housing one of the best investments you can make.

For most people, nothing outside of losing a job and not finding a comparable replacement does more to depress their confidence in the economic future than to see the value of their homes steadily falling. For many people, home appreciation is their ticket to being able to afford retirement. If, as a recent Business Week story said was possible - that home prices could fall another 25% before bottoming out - millions of aging boomers will not be able to afford retirement. That will have a major influence on the zeitgeist.

 A long period of economic stagnation will inevitably turn the mind of the market toward a fiscally more conservative bent. The character of consumers’ aspirations and obviously their lifestyles will undergo significant change.

To keep in lockstep with consumers, companies will have to change how they market - in some cases in profound ways. This will be the case not only in marketing to people in circumstances that force them to cut back on spending, but in marketing to more affluent consumers as well because nearly everyone's behavior is influenced by the zeitgeist.

Companies traditionally spend huge sums trying to assess the mind of the market as it manifests itself in the present. Now, however, they need to be assessing the likely disposition of the mind of the market three, four, five six or more years into the future. Why?  Because we're not likely not see the mind of the market bounce back to its disposition when talk around then office water cooler often consisted of people bragging about how much their homes had increased in value over the past several months.

Comments

[Ann]

All I know is this: I run with my dogs in a relatively new development, with lots of "spec" homes. One has been on the market 2+ years. Another has been there for 6+ months. Things are moving much more slowly. This needs to be taken into account -- perhaps a zeitgeist for snuggling in?

[Garlalilt]

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