Reconciling Consumer Crosswinds

Frequently, in his space, we discuss both the online and offline retail spaces as Mpayy's secure online shopping system relies first and foremost on the consumers' willingness to go shopping. However, beyond transactional data released by the Commerce Department and Comscore, there are other tea leaves that we can read to get a view into the consumer's plight.

Today we look at real estate and credit card transactions.

Underwater Real Estate

Zillow.com is an innovative online real estate research and data website that provides holistic views into cities and neighborhoods for consumers. Home-shoppers use the site to look at purchase data of homes near the addresses the potential buyer is considering. To do so, Zillow has to track publicly available purchase data nationwide.

Zillow released its Real Estate Market Report yesterday. According to Dr. Stan Humphries, Zillow's vice president of data and analytics, ""The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets. The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss." His prognosis is not rosy, predicting that "most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."



Zillow's press release mentions, "For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively."

In other words, the investment with the best track record of creating wealth, and most home-owners' largest investment is now a massive liability with exit scenarios that force a loss. Most home-owners save up for a substantial period of time before purchasing a home, and it will take time after those losses are booked before those folks are back in an equally financially healthy position they were before the purchase. This will have material consequences for discretionary spending for the foreseeable future.

Growth in Expenditures Benefits Payment Processors

Amidst the consumer damage resulting from the bursting of the real estate balloon, billions have been written off the balance sheets of banks related to illiquid auction rate securities, foreclosures, losses on home sales and defaults on credit card balances, there is significant strength among the payment processors. The American consumer continues to spend.

The chart below displays the payment processors versus the pure play credit card issuers.



However, the pure play payment processors are exhibiting unbelievable growth. MasterCard has skyrocketed over the last year, and Visa has demonstrated incredible strength since its IPO earlier this year. Visa demonstrated 8% year over year volume growth in its credit card volumes in the US and 28.5% in the rest of the world. Visa also reported more significant strength of 13.6% in its debit card volumes in the United States.

Mpayy's secure online payment processing system is a debit instrument that allows shoppers to pay online with their checking accounts. Mpayy saves the retailer money, guarantees payments and eliminates fraud liability. Shoppers receive enhanced security and cash back guarantees on top of expanding their ability to send money to their friends and family for free anywhere in the US.