Pawnshops Increasing in Popularity

On Sunday, I posted on the AW Blog about increasing activity for consignment shops in and around Palm Beach, Fl (click HERE to read). Fellow appraiser Kathi Jablonsky sent me an article from the LA Times by David Pierson on the increased use of pawnshops. In these difficult financial times, more and more people are turning to these "collaterzliaed loans" to cover both short and long term oblications. Many pawnshops now specialize in high end designer merchandise, and are not the seedy or fencing operations often depcited in movies of the past. Many are upscale, and located in good negierborhoods.

One pawnshop, Collater Loan reports loans are up by 20% over the past year.

Pierson reports Traditional lenders have seized up, and people of all walks of life are handing over their diamonds, purses and golf clubs to make their next mortgage payment or, in some cases, pay their employees for the holiday season, pawnshop workers say. "This whole period now is nuts," said Tal Shmargal, owner of Collateral Lender. "We have people taking loans just to keep their business afloat." It's a trend that's been reported nationally as the nation's economy continues its downward spiral. Two of the nation's leading publicly traded pawn companies -- Ezcorp Inc. and First Cash Financial Services Inc. -- are among just a handful of stocks that have risen this year, up 31% and 20%, respectively.

But with increased collateralized loans by pawnshops comes increased supply, and therefore a drop in prices when items are sold or puchased. Pierson reports on one upscale pawnshop which Traditionally, 94% of his customers eventually buy back their pawned items. But in the last year, he's seen the rate dip to 85%. Like the consignment article, this LA Times article discusses how more people are pawning property, but gives littel data on how much is actually being sold back to the public and at what price/value level.

For appraisrs, that is the important component to watch. As the consignment and pawnshop business continue to buy/loan, and the amount of merchanise consigned or pawned increases, the supply expands and values decline. More infomation for market reports.

To read the full LA Tims article, click HERE.