All We Know
I really want a new Ford Bronco.
I’ve built my vehicle at least a dozen times on Ford’s website and spent more hours than I care to admit trying to decide between Eruption Green and Area 51 as the color.
Yet other than a test drive back in October, I can’t seem to move past the dream stage.
There are a few reasons for this. One, no one expected Broncos would be this popular, and it’s a frenzy out there with dealers charging as much as $15,000 over MSRP. A microchip shortage worsened the problem and some buyers had to wait more than a year to pick up their Broncos. I suspect that costs will drop significantly by mid or late 2023.
But the price tag is only part of why I’m holding back. The bigger reason is that I’m nervous about making a large discretionary purchase and taking on more debt. My retirement account took a huge hit in the stock market, interest rates are high, and inflation is so bad that I’ve had to cut way back on spending just to stay even.
Who knows what next year will bring? Are we heading for a nasty recession?
Consumer confidence is dropping, and many remodelers have seen leads soften and backlogs erode as some projects go on hold.
And then there’s Jeff Bezos. Recently he told CNN, “If you’re an individual and you’re thinking of buying a large-screen TV, maybe slow that down, keep that cash, see what happens. The same thing with a refrigerator, or a new car, or whatever. Just take some risk off the table.” When the fourth-richest person in the world tells you not to buy a car, maybe you should listen.
The thing is, if you replace “new Bronco” with “new kitchen,” chances are decent you’d come up with the same sentiment.
Consumer confidence is dropping, and many remodelers have seen leads soften and backlogs erode as some projects go on hold.
Sticker shock plays a huge role as well. It’s one thing to pay more for food, but another thing when that increase translates into many thousands of dollars for a remodeling project.
Yet there are notable tailwinds as well. (See Carlos Martín’s column on this topic. He heads up Harvard’s Joint Center for Housing Studies.) In terms of remodeling, home equity is at record levels, houses are getting older, and while Boomers are still a major part of the remodeling market, Millennials are now the single largest cohort buying homes. Those houses will need work, and younger consumers are less likely to be scared off by the economy.
I don’t have a crystal ball, but if I did, I would say that regional differences in the remodeling market, which are always a factor, will become an even bigger consideration in 2023.
Company owners in large coastal cities tell me that their clients tend to rely more on financing, whereas the remodelers I know in the Midwest, south, and rural areas report a higher percentage of cash buyers. It follows then, that the softer market we’re seeing is more pronounced in areas where homeowners are like me: they want the shiny object, but the idea of borrowing makes them nervous.
When it comes to 2023, all we know for certain is that no one knows for certain. But whatever the market does in your area, I wish you a happy, healthy, and successful 2023!
