Less Home Sales–And Less Starbucks

The government’s new home sales and price results are in–and they don’t seem to indicate that the housing slump might finally be ending.

According to the Commerce Department, new home sales fell in March to their lowest level in 16 years–and median home prices fell by the biggest amount in almost 40 years.

  • New home sales declined by 8.5 percent last month to a seasonally adjusted annual rate of
    526,000 units. That’s the slowest new home sales pace since 1991.
  • Sales were down last month in all regions–most prominently in the Northeast, where they fell 19.4 percent. In the West, sales dropped by 12.9 percent; in the Midwest, they fell by 12.5 percent. In the South, sales fell by 4.6 percent.

And that wasn’t the only dour economic news today:

  • In March, big-ticket manufactured goods orders to factories dropped for the third consecutive month–the longest straight period of decline since the 2001 recession, according to the New York Times.
  • Yet unemployment benefit applications dropped by
    33,000 to 342,000.

The fact that demand for
durable goods fell by 0.3 percent last month reinforced the
general feeling that the softening economy is starting to really hurt
manufacturers.

It also reinforced the belief that the U.S. economy is headed for a recession: Orders haven’t declined for three months in a row since
early 2001–when the U.S. was entering its last recession, the Times said.

But wait! Another news item today indicated things are far, far worse than any durable goods or housing news might imply: People are starting to forgo their daily Starbucks fix.

The Seattle-based coffee retailer forecast its first decline in annual profits in eight years. And if you don’t see a connection between that and housing, Starbucks CEO Howard Schultz does: Calling this economic environment "the weakest in our
company’s history," Schultz said that Starbucks’ California and Florida markets–which account for one third of its revenue in the U.S.–especially suffered, according to BBCNews.

Those are, of course, also two of the states hardest hit in the housing slump–and, thus, Starbucks markets that "have been especially impacted by the
effects of the downturn in the housing market," the company said.

The company is trying some new things to correct the situation, which the CEO said will show
results in the future–such as the introduction of the new Pike Place
Roast coffee. (Which would explain why I was handed a card to get free
cups each Wednesday for the next month the last time I was in a
Starbucks–along with a card for a friend.)

But seriously, even Starbucks? This is the chain that, in the past year, doubled its number of stores to more than 15,000 in 44 countries, according to the Times?

Starbucks is a lifestyle for some consumers–a daily ritual. Or was.

According to Schultz, …"our customers are reducing the
frequency of their visits to our stores–due to the economic pressures
they are feeling."

First we got saddled with a high foreclosure rate; now less cash for creamy lattes? If that’s not a sign of a recession, what is?