Housing & Economy Tanks, iPhones & Video Games Surge?

image This week saw another blow to the beleaguered US housing market with the release of foreclosure statistics for the second quarter of 2008 (April, May, June).  In that period 739,714(1) foreclosure filings were recorded.  This is a jump of 14% over Q1 2008, and up 121% over the same period in 2007.  This means that one in 171 homes received a filing.  220,000 homes were actually repossessed by banks in that period.

There’s no question that the housing implosion is not only continuing with little sign of relief, but that it is accelerating at a nearly unimaginable rate.  It’s reached a point where congress has finally decided to step in to try and hold back the flood, to give home owners more time, and to try and prop up financial institutions as hundreds of thousands of borrowers default on their loans every month.

This, combined with out-of-control fuel prices pushing the cost of virtually everything else up, is creating a perfect economic storm that could threaten everyone, even those who are on sound financial footing at the moment.

Things are definitely looking grim.

In a declining job market, with high fuel costs, soaring food prices and a black hole of a housing market sucking everyone down, you would think that there would be a drop in luxury item sales like high-end techno toys.  As the financial future darkens, maybe folks would start cutting back to essentials.

Well, you certainly won’t get that impression if you look at iPhone sales.  The first twelve days of the iPhone 3G showed sales nearly double over the initial sales launch of the phone a year ago.  The iPhone overall has pushed up AT&T’s profits by 30% (2).

Keep in mind that the iPhone is a device that costs between $200 and $300, plus monthly contract fees that can be close to $100/month.  Before the launch of the 3G, the iPhone cost $500 to $600 depending on model.  Extremely pricey for a phone that doesn’t even hook into most corporate email systems (ok, so they’ve got Exchange setup sorta now on the 3G).

So we have sales for a souped-up phone doubling as an mp3 player and Internet device, but one could almost argue that an iPhone can have legitimate business uses.  So we’ll mark that down as a quasi-luxury.

But then there’s video game consoles.  We’ll ignore software sales and focus on hardware, since that’s the bigger ticket item, and you’d expect people to be more hesitant to plop down the cash for something with a high price tag.

So lets look at the number of consoles sold from the first week of January, 2006 through July 20th, 2008(3)

System 1/7/06 7/20/08 % Change
Wii 1,311,338 12,956,112 888.01%
360 5,154,412 11,985,140 132.52%
PS3 809,693 5,490,628 578.11%

So we’re seeing a strong surge in console hardware sales.  as of 7/20/2008, there have been 30,431,880 consoles sold (over the lifespan of each system so far).  For some perspective, there are 300 million people in the US.  This means that 1 in 10 people in the United States have a current generation console (on average).

Lets look at this another way, there were, as of March 2006, an estimated 114 million households(4) in the United States.  So the console owned average is just about 1 in 4 households.  And you know what?  Sales of these gizmos are still increasing, and at a quick pace.  The cost of essential items such as food are jumping, the cost to drive to work is soaring, people are losing their homes hand-over-fist, but people are buying consoles and phones at a stupid rate.  In fact, in console sales along, Americans have spent nearly $10bln.  Who knows what the actual figures are for iPhone sales and contract fees.

We have folks in Washington D.C whining and complaining about how unfair it all is, how the government needs to step in to save poor home owners, poor drivers, poor everyone who has to suffer increased prices on virtually everything.  But you know what?  How about we take a look at what people are still buying.  Why can’t we expect people to take responsibility for their spending?  Why is it up to everyone else to save folks from poor financial decisions?

My suggestion?  If you have purchased more than a few hundred dollars in purely luxury items such as video game consoles, cell phones, big screen TVs etc while not making payments on your home, then you shouldn’t get a red cent of financial assistance.  If you can’t get your spending priorities straight, it’s your own damn fault for being up sh*t creek without a paddle.


1 – Les Christie. “Foreclosure Filings up 120%.”  CNN Money.  July 25, 2008

2 – Sam Oliver “AT&T says initial iPhone sales double that of last year.”  AppleInsider.com.  July 23, 2008

3 – VGChartz.com US Console Hardware Sales Data.  1/7/06 – 7/20/08″

4 – “Households, Families, and Married Couples, 1890 – 2006”  InfoPlease.com