“Kings of the Animal (and Consumer Economy) Kingdoms”
Want a novel way to look at today’s housing market?
Think of housing occupying the same role in the economy that lions do in the natural world.
Namely, both sit atop their respective “food chains,” depending upon — and contributing to — the health of multiple levels beneath them.
The base of the Consumer Economy consists of “Consumer Staples”: those goods — starting with food — that are daily necessities, no matter what else is going on in the economy.
In the developing world, “Consumer Staples” are the economy.
In more advanced, Western economies, there are at least three additional levels of goods (not to mention services such as medical, legal, and accounting).
One. “Consumer Discretionary” (also known as “Consumer Durables), which include clothing, appliances, and furniture;
Three. Housing (owner-occupied, as opposed to rental).
As one rises in the chain, the financial commitments become commensurately larger, longer-lived — and therefore, more credit-driven.
They also become more influenced by consumer psychology.
Which is to say, people’s future expectations, confidence, apprehension, sense of well-being, etc.
The Role of The Crash of 2008: Credit & Confidence
Cumulatively, The Crash of 2008 and the concomitant housing market bust did to (the availability of) credit and consumer confidence what an epic grass fire does to a savanna: they destroyed it.
When the ecosystem eventually starts to recover — as it always does — what returns in numbers first aren’t the lions at the top of the food chain.
Rather, it’s the flora and fauna at the bottom — the grasses, plants, mice, etc. that support the lions’ prey, which in turn support the lions.
Which is where autos and the housing market come in.
Gazelles and “Impalas”
If Lions are like houses, what are cars like?
Gazelles and antelopes (or should I say “Impalas,” General Motors’ one-time best selling car).
One of the best harbingers of housing market recovery, then, would appear to be signs that the auto market is rebounding.
It just so happens that it is — smartly.
The latest monthly statistics show car sales accelerating to an annual rate over 13 million — up from a low of 10 million three years ago (and down from a 2007 peak of 18 million).
With continued recovery in Autos, it can’t be too long before the top of the food chain — Housing — participates as well.