Housing slump suppresses appetite for electronics

By Michelle Kessler,

SAN FRANCISCO - The tough real estate market isn't just affecting home sales - it's also prompting consumers to buy fewer TVs, digital cameras and other electronics.

Sacramento, Phoenix, Tampa and Detroit were the four metropolitan areas with the biggest drops in consumer-electronics spending in the fourth quarter of 2007, compared with the previous year, says a study out Monday from researcher NPD. The study examined retail sales in the 40 largest urban areas in the USA.

Those four cities were also among the top 10 major markets for declines in housing prices, says the National Association of Realtors. Sacramento posted the biggest drop in both electronics sales and housing prices.

Nearly every area with a decline in electronics sales also had falling home prices, says NPD analyst Stephen Baker. That's a big change. Unlike many other products, electronics sales have weathered all downturns in recent years. U.S. sales rose 72% from 2000 to 2007 - a period that included the dot-com bust, says the Consumer Electronics Association, a trade group.

People began to think of electronics "like plumbing and air conditioning - something you had to have," says Baker. But now signs of weakness are appearing.

"You see a lot more tire-kicking: customers coming in but not really buying," says Leon SooHoo, owner of Paradyme Sound & Vision in Sacramento. Customers "are much more choosy," he says.

SooHoo says high-end TVs are selling well but not enough to make up for declines in mid- and low-end products. Many customers "seem to be waiting until things stabilize," he says.

In Tampa, the Stram Electronics' Home Theater Gallery has seen a similar pattern. The most elaborate home theater set-ups, which can top $100,000, are selling as well as ever. But homeowners of more modest means have cut back, says owner Mike Stram.

Some home builders canceled contracts when new developments were put on hold, Stram says. But that's been offset by new orders from other builders, who are adding home theaters to new houses to make them more compelling in the tough market, he says.

This doesn't mean that people are no longer buying TVs and music players, Baker says. They're just being more careful about it.

Even when times are tough, "Consumers are motivated to spend whatever discretionary dollars they have on consumer electronics," says Stan Glasgow, president of Sony Electronics.

Sales in Sony's worldwide electronics division rose 4% in its most recent quarter after adjustments for currency fluctuations. Sony does not release sales forecasts for specific types of products.


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