In 2014, as household formations reached record lows, I wrote several columns concerning the impact this would have on the consumption patterns of men and women and the reflection of it in the performances of the stocks of companies with a gender-specific clientele.
The overarching theme was that low household formations meant men were more free to spend on themselves, rather than on family, and that women were less able to do so.
This should have caused male-oriented stocks to outperform the stocks of companies catering to female consumers, and indeed that trend proved to be true.
In keeping with the theme I've been writing about recently, though, that the younger generations are beginning to shift consumption toward housing, this is a good time to consider the impact of such a shift on both male and female consumption.
I last addressed female consumption in the February column "Female Consumers Keep Us From Recession," and I'll use the data referenced in that column in this one.
If the trend toward a positive shift in home purchase activity by first-time buyers is occurring, it will have to be preceded by a decrease in consumer spending by both men and women, and a shift toward lower-cost substitutes where possible.
The substitution issue is a continuation of the branded vs. unbranded retailers I've written about previously, and will address again in a separate column.
The reason for the decline in consumer spending is that households will have to increase savings both in preparation for it to be used for home purchase transaction costs and for it to be transferred to ongoing housing costs.
Although this will require a reduction in both male- and female-oriented consumption, in preparation for family-oriented spending, the brunt of the savings will come from reductions in male consumption and should be evidenced there first.
I wrote about male-oriented stocks and why they were performing better than female-oriented stocks in the column "Bikers, Bullets and Booze" about 2½ years ago.
By ranking the seven stocks mentioned in that column according to the degree of male orientation and discretionary funding, their performance over the past year indicates that male-oriented consumption may be beginning to decrease.
Harley-Davidson (HOG) is down by 11%; Sturm Ruger (RGR) is up by 21%; Snap-On (SNA) is down by 4%; Anheuser-Busch InBev (BUD) is up by 4%; Boston Beer (SAM) is down by 21%; AutoZone (AZO) is up by 16%; and Home Depot (HD) is up by 19%.
Of those, the only two that have continued to appreciate steadily and in keeping with the previously discussed outperformance of them vs. the female-oriented stocks are AutoZone and Home Depot. Home and car maintenance are also family-oriented functions and it's probable that these stocks won't follow the lead of Harley-Davidson if the trend away from male consumption and toward family consumption accelerates.
If that trend does accelerate, though, it is probable that the other stocks, with the exception of Ruger, will begin to perform closer to that of Harley than of Home Depot.
The importance of being aware of this trend and monitoring it is that it is one of the things that must occur prior to a resurgence in housing activity.
All the trends I've written about over the past few weeks must evidence themselves sequentially rather than coincidentally. That is, a decision to forgo the purchase of the Harley, or whatever, must precede the purchase of the house.
Those decisions also create the cyclical deceleration in economic activity that allows for the decline in Treasury yields and mortgage rates to occur, that in turn creates the environment for a resurgence in home purchase activity.
The combination of all of these trends creates a self-reinforcing social shift in consumer attitudes once enough momentum is achieved. That is, once a marginal shift in consumer attitudes has occurred, the desire to conform will cause the shift to manifest itself further, even without the requisite decline in mortgage rates necessary to start the process.
It's still too soon to determine if that will occur.
Even with the consumption patterns appearing to indicate a fundamental shift in consumer attitudes toward housing has begun, I still think mortgage rates must decline below 3% for a 30-year fixed conventional conforming mortgage in order for the potential of a rebound in first-time homebuying to be realized.