Slimy rows of gold tooth caps have been finding their way into Rob Schneider’s hands.
That’s because Schneider can turn gold grills into dollar bills.
“It’s disgusting,” Schneider says. “It’s all wet and slobbery.”
Schneider carries a set into the back room of 49th Street Pawn and Gun to wash them and determine his offer price — around $10 or $15 a set. His customers, who likely paid nearly $200 for the set, need cash — now.
Their loss is the pawnshop’s gain as gold skyrockets in value.
“Guns and gold,” Schneider says. “They’re the only two items that you can bring into a pawn shop that won’t depreciate.”
But these days, guns and gold are sharing space with a growing array of goods as Tampa Bay area residents haul their sellables to pawnshops as a lifeline in a turbulent economy.
As the housing market plummets, unemployment rises, and food and gas prices soar, St. Petersburg pawnshops are drawing everything from flat screen TVs to SUVs.
Evidence of the pawn economy sits under a glass countertop in the shape of roaring lion pendant and Jesus hanging on a cross. It hangs on the walls as unused high school band instruments. It pours out onto the sidewalks as ladders and into the parking lots as a parked truck, shed like an oversized crab shell. It includes a white boat engine, eight vacuums, 16 nail guns, 30 fishing poles, electric and acoustic guitars, flat screen TVs, iPods and one Nintendo Wii.
In recent months, pawn trade in construction equipment and power tools has spiked — another indicator of the ripple effect of the subprime mortgage crisis.
“Coil nail guns, circular saws, chop saws, concrete saws — those are all things that people would use in everyday work,” says Schneider, pointing to two aisles at 49th Street Pawn overflowing with tools. The incoming supply has been so intense, and the outgoing demand so light, that he seldom accepts pawned tools anymore. “We’ve pretty much denied them for five months.”
At the same time, some pawnshops report an increase in people scouring their shelves for bargains — another form of the secondhand shopping in an era of tightening budgets. That makes pawnshops a rare bright spot in a gloomy economy.
But some pawnbrokers aren’t selling as many tools as they’re receiving and have lowered prices to move surplus goods off of their overloaded shelves.
The construction micro-economy
Inside a Cash America pawnshop on Fourth Street North, the smell of steel and stale oil rises off aisles of power tools.
It mixes with the sweat of a man fresh off of a plumbing job hocking, or pawning, his 8.5 horsepower Hitachi air compressor.
“I just don’t have any work for it right now,” says Junior Clem, who launched his own handyman company 18 months ago.
Armed with little more than a tool belt, Clem hoped to capitalize on the demand for construction work. Instead, he walked straight into the housing crisis in a particularly hard hit area.
The handyman jobs that come his way are spotty, making his income less reliable than his bills. He has already sold his truck. And now he’s turning over his air compressor.
“I’m going to pay my cell phone bill — because if my phone doesn’t work, I can’t get calls for work,” says Clem, who has a 4-year-old and a toddler at home. “The rest of the money goes to diapers.”
In the past year, construction jobs in the Tampa-Clearwater-St. Petersburg region have dropped nearly 9 percent, according to the U.S. Department Labor Bureau of Labor Statistics — making the industry another victim of the subprime mortgage crisis.
Tools have always been a popular pawnshop item, accounting for 25 percent of pawn loans and 20 percent of sales at Southern Pawn, says district manager Phil Iovino. He oversees Southern’s nine bay area shops.
But in the past year, tool pawn loans have jumped 10 percent, and tool sales decreased by 5. Iovino doesn’t see that trend reversing anytime soon.
Clem is part of that trend — someone hocking what he can as he tries to hold on paycheck to paycheck.
His air compressor, which cost him $279, yields him $90 in cash. He plans to rescue it after he gets paid for a tiling job he has lined up. To get it back, he will pay the $90 pawn loan, plus at least $20 in pawn fees.
But Clem says the extra cost next week is the price he must pay to get by this week.
Other construction workers have given up on getting their tools out of hock. As the economy worsens, many have defaulted on pawned equipment or are selling tools outright for a fraction of their worth.
That has created an oversupply, which is driving down local tool values — making them a good buy for those looking for a deal.
How pawnshops work
Pawnshops are both lenders and retail stores, illuminating several facets of the economy.
Customers hock their valuables for immediate cash — no loan papers, no credit qualifications, no waiting. That can be the end of the transaction for some; the goods now belong to the pawnshop and are put on the display shelves for sale.
Or customers can pay the pawnbroker a monthly fee to hold their valuables, keeping them off the retail floor until they can buy them back. The holding fee varies from shop to shop, but it’s typically about 20 percent of the original “loan” for an item.
For example, say you hock your $300 iPod. A pawnbroker gives you $100 cash and holds the iPod as collateral. To get your iPod back, you’d have to pay $120 within a month. If you can’t, you pay another $20 a month for the pawnshop to continue to hold it. Miss a payment and the pawnshop claims ownership, putting the iPod out for sale. Now to buy it back, you have to pay the retail price.
Pawnshop owners won’t divulge their retail markup. Nor is there any guarantee about how much cash they’ll pay for any given item. The amount of a pawn loan can change with the quality of the commodity and with supply and demand. So in the case of the iPod, you might have to fight for that $100.
But there’s another aspect of the pawn economy: how desperate customers are for cash versus how attached they are to what they’re pawning.
A little time in local pawnshops shows that emotional economy at work.
One woman, who is an avid movie fan, unloads 34 DVDs onto the counter of Pawn Depot on 34th Street North in late June. She receives $34 and asks that they be kept on hold. She says she’ll be back to get them as soon as she gets her next paycheck. DVDs on the shop’s retail shelves are priced at $5 each.
Another woman is turned away when her necklace tests negative for gold. “That’s OK,” she says as she tucks it back into her black Velcro wallet. “I understand.”
Danny Timm comes to pawn shops not for cash but to buy goods for resale. He pays $100 for a cart full of hand tools at the Cash America on Fourth Street North and will resell them the next day at a flea market.
“When things get tough, people become handymen,” Timm says. “The do-it-yourself tools are popular.”
Lately, though, he steers away from the “serious” power tools, which he says “you can hardly give away.”
Supply and demand
The average loan from a pawnshop is $75, according to the National Pawnbroker Association’s Web site. The average age of a borrower is 36, with a household income of $29,000. Eighty percent are employed, and 33 percent own their own homes. Eighty percent of the loans are paid back.
But as the economy changes, so do the demographics of pawning.
“We have seen an increase in middle-class households coming in and pawning items due to the housing market,” Iovino says of his Southern Pawn stores.
And more people are pawning trucks and SUVs to try to get some relief from rising gas prices, he says. Iovino resells them for less than their trade-in value.
Cash America International Inc., which operates 500 stores around the country, will release its latest lending and sales numbers in a few weeks. But anecdotal evidence already hints at changes.
“We are seeing more people who can’t afford to buy brand new TVs from major retailers come and give us a try,” says Yolanda Walker, a Cash America spokeswoman. “People are taking advantage of our retail in a tough economy.”
Meanwhile, the value of gold has nearly doubled in value in the past year, making it a hot item for both pawners and lenders. Hence Schneider’s acquisition of gold tooth grills.
In this economy, it seems there is no limit to what people will try to pawn. Dave Baker of Pawn Depot tells a story of a man who called to see if he could pawn his house. Baker had to tell him no: "He couldn't bring it in to show it to us.”