Tag Archives: William C. Dudley

Debt and Other Economic Factors Affecting the Building Product Industry

23 Dec

Keeping an eye on the recovery of the economy is important for building product CMOs to consider as they make long-term strategic marketing plans.

As you know, building products and the housing market have easily been the segment most effected by the economic problems of the past couple of years. Recently released statistics and news from across the industry show a promising yet realistic view of the slow recovery.

Consumer Debt Decreasing

Consumer debt is decreasing, according to the Federal Reserve Bank of New York’s article, Consumer Debt Falls in Third Quarter, “ household debt in the July to September period fell by .6% from the previous quarter to $11.66 trillion.” This is especially relevant for the building products industry as the main decrease was in mortgage balances, according to the article. Excluding mortgage balances, household debt actually increased by 1.3%. This means that households are decreasing their home-related debts and spending more as their finances stabilize. Home buyers enhanced caution to ensure they don’t go further in depth on their homes is an important factor to consider in your marketing plans. Making sure that your consumer-facing sales team is aware of this price and debt sensitivity can help them to understand the customers and how best to sell to them without pushing them further into debt.

New Mortgage Debt Decreasing

Also according to Consumer Debt Falls in Third Quarter, new mortgage debt is “…at it’s lowest level since [the year] 2000″ which is due to:

  • Depressed home values – Lower home values means consumers mortgage value is also lower
  • Tighter lending standards – As set by the major financial institutions
  • High unemployment and stagnant wages –  These reduce the level of home buyers

Home Equity Increasing

When looking at the history of home ownership and mortgages, it’s important to note that as the recent recession progressed, the average homeowner owned less and less of their house due to higher mortgages. As you can see from this chart, used in a speech by William C. Dudley, President and CEO of The Federal Reserve Bank of New York, equity levels have been starting to work their way back up from a low of below 40%.

As shown here, "the average homeowner still is substantially more leveraged than before the crisis and has lower net worth".


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