Selling Money, a Profitable Business

The housing boom has turned the business of selling money one of the most profitable. As consumers "tap" into the equity in their homes (i.e., as they go further into debt), banks and financial services make out like bandits. This graph, based on data from Business Week's "Corporate Scoreboard" for 2004, shows the profit margins of various industries. Not surprising, banks lead the pack, making more than 20 cents profit on every dollar of sales.

As the housing bubble bursts, though, will we see the profit margins of banks and financial services decline? Many banks are seeing the lion's share of their profits coming from the housing sector - first mortgages, HELOCs, and so on - but how will growing inventory, stagnating prices, and increased foreclosures affect their bottom line? Yes, today banks, realtors, mortgage brokers, and the like are raking in fat money, but tomorrow look for bankruptcy lawyers to be busier than ever.