The auction industry has undergone dramatic changes in the past two decades. Technology has allowed auction companies to reach millions of potential bidders who can compete from anywhere in the world. Seamless shipping options deliver auction items to these bidders who never need to leave their homes.
But many items that used to be the bread and butter of the auctioneer’s business now go for a small fraction of their former high-flying prices. Twenty years ago, an estate full of antiques was an auctioneer’s dream. Now, it’s just another ‘brown furniture’ event with low interest and low prices at auction time.
We all know that supply and demand are the fundamental economic principles that drive our industry. High demand and low supply tend to keep prices high. Low demand and high supply drive prices downward. A glut of supply of a particular type of property in the marketplace is a surefire way to drive down auction prices.
Auctioneers nationwide have seen a growing supply of furnishings and collectibles offered for sale in recent years. There has also been a steady decline in demand—and prices—for many of these items. Glass, crystal, pottery, and figurines garner a fraction of their former values. Good solid well-built furniture pieces that still offer years of use are selling for pennies on the dollar as compared with the prices they brought just two decades ago. More than a few auctioneers can’t help but feel frustration when they see shoppers willing to pay hundreds of dollars for the privilege of assembling pressed board furniture items while solid wood well-built ready-to-use pieces bring next to nothing at auction.
Managing client expectations can be frustrating as well. Sellers need to know—but usually don’t want to hear—that the market is already swollen with the same things they want to sell. They also need to understand that, even though auctions can reach more and more people with online sales, it’s becoming harder to get buyers interested in those things.
Of course, auctioneers handle far more than personal property. But personal property represents a significant portion of auction sales and the problem could become so profound in the next decade that many auctioneers might have to drop out of the industry. Those who dream of passing their auction companies to their children are coming face to face with the omnipresent laws of supply and demand.
Another important part of auctioneering is marketing and sometimes we don’t give this aspect of our business the attention it deserves. Getting new people interested in auctions is a big challenge.
We at Carolina Auction & Realty wanted to take a hard look at the problem and the underlying factors that have led to this situation. In this article and the next one, I discuss intergenerational demographics and how forces that influence the various generations have affected and continue to affect buying habits. I cover some of the factors that shaped the last several generations and how their preferences affect the auction industry. Understanding the dynamics of demographics can help the industry develop marketing strategies that will strengthen the auction method of selling for decades to come.
The Supply Side of Auctions
Three generations filled their homes with things that, today, are finding their ways into auctions. These cohort groups include the greatest generation, the silent generation, and the baby boomers. These are the demand groups of the past. Now they are selling instead of buying.
The Greatest Generation:
The greatest generation, born between 1901 and 1924, experienced waves of hardship. Many today cannot understand the wide range of severe hardships that forged a cohort of people who provided a deep demand for furnishings and collectibles for decades.
This is the generation that was just starting to develop when World War I yanked millions of soldiers from their families. Though the United States entered the war late, it still suffered over 116,000 military deaths before the war ended in 1919. Part of this loss was due to the Spanish Flu pandemic which took some 675,000 American lives. The pandemic was particularly insidious because losses were especially heavy among young healthy adults who contracted the flu.
But the war and pandemic ended, returning millions of Americans to their families and launching events that forever changed America’s landscape. In the 1920s, more than half of Americans lived in cities. Women had just been guaranteed the right to vote. Many women worked in stores, offices, and other businesses. Family discretionary income rose and people started acquiring more products as chain stores opened across the country and advertisements urged people to part with their money. Wealth in America doubled. And many families bought radios, household conveniences, and their first automobiles.
On the surface, the 1920s looked like a hopeful and exciting era. But below the surface, problems expanded, possibly made worse by the appearance of prosperity that hid many of the growing problems. The growing wealth among Americans wasn’t evenly distributed. And the decade presided over rising immigration, religious, and racial tensions that divided Americans. Prohibition pitted some Americans against law enforcement. Even a legal ruling that teaching evolution violated the law left lasting issues that remain unresolved. But there was financial optimism in the air and people grew more and more speculative in their investments.
In 1928, the Federal Reserve realized that uncontrolled speculation could be disastrous to the American economy but debated whether and how to curtail the exuberant speculation in the markets. Ultimately, the Federal Reserve Bank of New York raised the discount lending rate which make banks pay higher rates to borrow money from the Federal Reserve. This increased the interest rates paid by companies and individuals which, along with subsequent Federal Reserve Intervention, unintentionally led to Black Tuesday.
The stock crash of Black Tuesday led to the Great Depression. Many Americans were wiped out as banks failed, unemployment skyrocketed, and stock values barely recovered a fifth of their prior values. Americans were plummeted into grinding poverty. Just meeting basic needs was a hardship. It wasn’t until America entered World War II that the American economy recovered some of its prior vitality.
The greatest generation grew up with the First World War and the Spanish Flu. They lived through the dramatic social changes of the 1920s and a decade of grinding poverty, doing whatever they could to feed and clothe their families. Then they were called upon to fight World War II. Young people flocked to the recruiting stations, entering the war willingly—even eagerly. But the war reinforced for many the ‘nothing is guaranteed’ lesson. Over 400,000 Americans died in that war and Americans at home faced government confiscation and rationing for the war effort, reminding them again that comfort and security could be fleeting.
After the war, the greatest generation created a booming economy and became financially successful. With their newly found wealth and security, many of these people filled their homes with furnishings and collectibles, many of which they probably bought at auction. Whether they did so as insurance in case of economic downturn or because they had the wherewithal to indulge in collecting things, this packrat mentality led to a large supply of this type of personal property.
Most of these items have been passed to their children, the baby boomers, or sold, often through auctions, over the years. Now, as baby boomers downsize, many of these items are showing up at auctions. More supply. Lower prices.
The Silent Generation:
The silent generation, born between 1925 and 1945, learned the same lessons as their greatest generation counterparts. Some were forced into labor at very young ages and helped their parents in the family struggle to put food on the table. Many came of age during World War II and some likely lied about their ages to sign up to fight.
We don’t hear a lot about this generation but much of these people saw hardship directly. Some learned about it from their greatest generation associates along the way. They were generally acquirers as well. Now with the youngest of this generation in their 70s, some of their personal property is part of the supply stream of furnishings and collectibles in today’s auction market. But quite a few of their items remain in their homes or in the homes of their children.
The Baby Boomers
The children of the greatest generation, the baby boomers, were born between 1946 and 1964. As a generation, baby boomers inherited their parents’ propensity to collect things and have been among the most prolific buyers in the auction industry over the years. Now they have joined the ranks of sellers, contributing to the growing supply of furnishings and collectibles on auction blocks nationwide.
Baby boomers tend to live in large homes fully furnished in varying styles. As their greatest generation parents pass on, they are inheriting their parents’ collections as well. As a result, baby boomers are becoming awash with stuff. Storage units and garages are often piled high with items that this generation either doesn’t want or cannot fit in their homes. Many of these items are now being offered for sale at auctions.
Realtor.com says most baby boomers aren’t selling their homes. Realtor.com uses the age group of 55 to 74 so it’s slightly different from the Census numbers but close enough for a meaningful analysis. The group comprises 21 percent of the population as of 2015, up from 16 percent in 1985.
According to realtor.com, 72 percent of home owners in this group say their homes fit their current needs. Among these boomers, 85 percent have no plans to sell their home in the next twelve months. So does this mean baby boomers are not downsizing as we thought? No. The baby boomer numbers, alone, don’t tell us the entire story. Further, just because they’re not selling their homes doesn’t mean they’re not selling their stuff.
The realtor.com snapshot offers some useful insight. But it’s important to look at the numbers from the other angle as well. The baby boomer generation continued to grow in America as immigrants born during that period swelled that cohort group’s ranks. The number of baby boomers in the USA peaked in 1999 at 78.8 million. By 2011, this group had shrunk to 77 million and is projected to fall to 60 million by 2030.
Let’s assume there are currently 70 million baby boomers which is a slightly conservative estimate given the Census information available. If 72 percent of these say their homes fit their current needs, that means 28 percent, or almost 20 million boomers, do not believe their homes suits their needs. Of these boomers, realtor.com reports that 85 percent have no plans to sell within the next year. This means that 15 percent of these 20 million–about 3 million–boomers might be selling their homes within the next year. Even if we cut this number in half on the assumption that two baby boomers live in each home as a couple, the number of baby boomer households potentially being sold this year could exceed 1.5 million. This number would be higher, of course, because many boomers live alone. But as a baseline, 1.5 million boomer homes stuffed with furniture and collectibles could be on the market very soon.
Moreover, many baby boomers are still storing their parents’ possessions in their garages, attics, second homes, and storage units—pretty much anywhere they can put it. As they age, they often choose to simplify their lives and declutter even though they stay in their current homes. It is reasonable to assume that many of their personal property items could soon find their ways to local auction companies for dispersal.
The Future of Auctions
The generations that fuel the auction industry’s supply of items to sell has created a significant challenge for auctioneers. The market is full of these things but the younger generations that represent our potential buyers for these items hasn’t shown the level of interest auctioneers need to see.
In my next article, I will discuss the younger generations that form the demand side of auctions—generation X and millennials. Understanding these groups, especially millennials, can help the auction industry to adjust to the new dynamics of supply and demand.
Tom Jordan, Auctioneer, CAI, AARE, AMM, CES, MPPA, has been an auctioneer for almost twenty years. He is licensed as an auctioneer in North Carolina, Virginia, and South Carolina and as a real estate broker in North Carolina and South Carolina. He is the owner of Carolina Auction and Realty, a Raleigh, NC company offering online real estate, commercial equipment, estate, business liquidation, and benefit auctions. He holds a Bachelor of Science in Business Administration and is a graduate of the Certified Auctioneers Institute at Indiana University. He serves as the Vice Chair and Trustee of the NAA Education Institute and as Chairman of the Conference and Show Education Committee.
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