Unemployment and under-employment are hurting the AV business. If you don't make as much money as you used to or your spouse is out of work, it's hard to truly justify why you need that new HDMI 1.4e AV preamp or a new pair of speakers. Loss of paper value on homes also affects consumer confidence. In 2005 when one's home was worth $100,000 more than the previous year, for no real reason, and the bank was willing to lend to you from that "equity" - that new 52 inch flat screen HDTV seemed perfectly reasonable in ways that are hard to remember today. But the biggest negative effect on the home theater market is the inability of people, specifically 1099'ers, to get home loans. Take a standard $500,000 home that is now for sale in foreclosure for $210,000 - there are millions of them out there today - the young buyers of today can't really take their first step. If they don't have a job, which is often the case, the income isn't there. If they make their money as a 1099'er, they might as well not try to buy a home without a 50 percent deposit; yet a $210,000 homebuyer could very likely be the same person who, when they move in, would be looking to add HDTVs, wireless Internet, a 7.1 home theater and other goodies. Over time, that person/family is likely to upgrade that system to higher end goods, especially if that $210,000 home is worth $300,000 in, say, 10 years; incomes are higher and overall consumer debt is lower. That's supposed to be the American way. Take the write-off on your home loan, save a little money, grow your wealth a little perhaps in an IRA and keep your consumer debt low. Clearly that's not how many did it in the 2000's and the fallout in this decade has been nothing short of disastrous.
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Please also read Andrew Robinson's article Building A Reference Grade Media Room on a Budget - Part One. Also there are two great threads on the forum of our sister site hometheaterequipment.com, Banks...A Four Letter Word and Real Estate Boom-Time Won't be Returning Anytime Soon.
The home theater business has never known a real recession until now. We've had a series of new technologies that were so tempting that people would buy them no matter what. Other than a few Apple products like the iPad (which isn't really a traditional home theater product), there is no killer app product like DVD, Satellite television, flat HDTVs or surround sound to pull the industry up by its bootstraps.
When loans become available to more people - specifically a more gainfully employed Generation Y - the resale of the homes from foreclosure will repower the consumer electronics business. Value will be the word of the day when the recovery comes and that day may still be a year or two away. People will not blow crazy money on extravagant audiophile and videophile products the way they did in the past, but they will buy because what the AV business sells is cool. Despite the housing market, the unemployment and the loan problems - paper-thin HDTVs are killer. Universal remotes have that wow factor. Blu-ray players make a great sound and an even better picture. Movie and music servers make entertainment more fun than ever before. And that's good news - people still badly want what the industry has to sell and they will be back to buy it in the years to come - but this time with different rules, demands and expectations.