Last week, I mentioned the idea of giving taxpayers a greater voice in our government by essentially allowing them to vote where their tax dollars go. And instead of just a representative democracy, its the people who represent themselves in a interesting mix of capitalism and democracy, two systems that some pundits have complained are at odds with each other
This week, I want to take that empowerment theme another step further. We often hear discussed how consumer spending is a huge part of the American economic engine. Consumer confidence is tracked ever-so closely as an indicator of what is to come for the economy. So I think few people would dispute the influence the crowd has.
Unfortunately, the consumer in the United States is persuaded, influenced, deceived and otherwise manipulated into behaving certain ways. Sometimes that manipulation is sheer market force, like Wal Mart who can sell for less due to sheer volume. Sometimes it's crafty marketing that leads us like sheep to buy the latest gadget that we are made to believe that we need. Sometimes it's fear of the mad cow chicken flu ailment cause of the month that drives changes in eating habits. Sometimes, it is a higher minded motivation such as civil rights that leads to a boycott of companies that are financial backers (or opponents)of Prop 8 in California.
Whatever the case may be, consumers have some level of power. However so often, we forget that power is there, or we lack the organizational skills or capabilities to impact the thing we seek to change.
One such example of a big problem that the consumer seems powerless to influence is the current economic crisis, meltdown whatever you want to call it. We wait patiently for our leaders to propose and solve the problem for us, rather than proactively banding together to influence the economy ourselves. We wait for those economic stimulus checks to come in the mail, or the tax cuts, or the lower interest rates, whatever. But in all cases, we are waiting for someone else to push the levers of the economy and save us. Meanwhile, we tighten the grip on our wallets and purse strings and make matters even worse.
But we needn't. If we the consumers worked together we could influence change on this economic crisis. What made me come to this realization was my recent experience trying to sell my house during this downturn in the real estate market. The market just plain sucks, lets face it. And sadly, my spouse decided that things between us just weren't going well and weren't going to get better, so decided to throw in the towel. So we had to sell the house to split things up. But putting a house for sale in an already glutted market was a futile exercise. We were competing with so many other houses for sale and few buyers.
So what could we have done? Well, lower the price of course! But, just like clutching the purse strings tighter and tighter, this is just a self-fulfilling prophesy. The more you lower it, the more people think they can get a deal from you and that you'll lower it more if they just wait you out. And the real estate market just continues its downward spiral. Ultimately, I made a different choice. I took money off the sidelines, took a risk and bought out my EX so I could take the house off the market.
Unfortunately, not everyone has the luxury that I did with a sizable rainy day fund that allowed me to go through with the buyout. But, during the 3 months the house was listed, I encountered many owners who had their homes listed for very capricious reasons such as... well, I just wanted to test the market and see what I could get. Or, hey, I just felt like it was time for a change. Meanwhile, those going through breakups, illnesses, relocations, etc. were stuck competing with these less than motivated sellers, and it all just worked against us.
What to do? Crowd economics. If we had united home sellers, and a little bit of shared sacrifice, we could rely on the tried and true laws of supply and demand. Too much supply, not enough demand equals lower house prices. But if we could coordinate the crowd and get some of the sellers to pull their listings off the market, well, that means less supply to meet the lowered demand. One must presume this would have a stabilizing effect on real estate prices by bringing these two forces into closer balance.
How do we pull this off? Well, you could structure it in a hundred ways, but so far I haven't come up with anything better than this... Simply say, for the next 90 days, any sellers whose last name begins A-M and is not in a crisis to sell their house... take it off the market! After 90 days are up? Its time for the N-Z folks to take their houses off the market. Sure, not everyone A-M are going to participate in this. It is, after all, voluntary. And some people just don't care about their neighbor that much, they only care about their own personal needs. But there are those of us who would be willing to give up a little bit of autonomy if it meant that 3 months down the road we'd be able to get the equity back out of our homes.
You could tweak this simple system I suggest in so many ways, but part of the beauty of a simple system is that people actually might understand it. Just like a boycott of a company's products for bad behavior can quickly impact the bottom line, it's impossible for me to not believe that if we the consumers united, we could not have a major impact on the housing crisis... without having to wait for Obama or his new cabinet to be in place, without waiting for the Fed or Treasury to bail us out and without having to lose all the equity we've built up in our homes in the process.
So, for those of you with a last name ending A-M who have your house listed, please take it off the market until March 31st. You'll get your turn on April 1st to sell your house. Your short-term sacrifice might just save you thousands of dollars in equity later on.