Cash of last resort
Jewelers, pawn shops see uptick as furloughs, layoffs mount
The calls and emails started pouring into Shaftel Diamond shortly after the furloughs and layoffs hit.
They all had similar inquiries: I’ve got a diamond — an engagement ring from a divorce, a family heirloom, a spare piece that hasn’t been worn in years. How much can I get for it?
“People don’t sound particularly desperate, but they seem to be a little more in need of cash,” said Danny Shaftel, the general manager of the longtime Houston jewelry shop. “Unfortunately, it’s only picking up with oil and gas. In the last two weeks, we’re starting to see nicer pieces, bigger and higher-value items coming in.”
Some Houstonians who have lost their jobs during the novel coronavirus pandemic are turning to diamond buyers and pawn shops, seeking quick cash to pay the mortgage, rent and bills. Since March, when the virus started spreading widely in the U.S., 1.9 million Texans have filed applications for unemployment benefits, nearly double all the claims submitted statewide last year, according to the U.S. Labor Department.
The federal government is spending trillions of dollars to help families and businesses weather the economic crisis stemming from the global pandemic. But financial aid has been slow to come for millions of Americans who live paycheck to paycheck.
As a result, Houstonians who are out of work with little savings are starting to sell jewelry and pawn possessions to get through the economic crisis. Selling grandma’s diamond ring could cover a month’s mortgage, and pawning a large TV could take care of a car payment.
“Where else can you get a lot of cash quickly?” Shaftel said. “Are you going to sell your lawnmower to a neighbor for $20? Gold and jewelry are where people are finding money.”
More pain ahead
To be sure, local diamond and pawn shops say they have yet to see the kind of demand they saw during the 2008 recession. After all, Houston is still in the early stages of the economic fallout from the coronavirus pandemic and the oil market collapse.
But shop owners said the increase in business so far is a harbinger for deeper pain if the economy doesn’t recover from the crisis quickly.
“We’re a leading indicator,” said Pamela Wright, a co-owner along with her husband of Wright Pawn & Jewelry
off Westheimer. “We can usually see when people are beginning to be laid off. Anytime there is any type of layoffs, we always have an uptick in business.”
Pawn shops, such as Wright Pawn, loan money to people using their possessions as collateral. Borrowers have a couple of months to repay the loan — capped at $16,000 in Texas — along with interest and fees to reclaim their items. If a borrower defaults, the pawnbroker takes ownership of the item and can sell it. Although interest rates are high, defaults don’t negatively affect people’s credit score.
Recessions usually follow a pattern, Wright said. People first pawn their jewelry and handbags, and as the economy worsens, family heirlooms such as china, artwork and collectibles.
Wright said it hasn’t come to that point yet. The stimulus checks and Paycheck Protection Program loans, while slow to come, are helping those who have received them. In fact, some customers have called in to pay off their loans with their stimulus checks and pick up their pawned possessions.
“We’ve got customers who obviously need the money, but no one’s running in here in a panic,” Wright said. “I don’t think that the rush to pawn shops has hit Houston yet.”
Down the street, Westheimer Pawn manager Antonio Jones said he has seen a 10 percent to 15 percent increase in new business during the pandemic. New customers from as far as Katy and Pearland are driving in to pawn jewelry, purses, shoes, TVs and computers, he said.
“They never thought about coming to a pawn shop,” Jones said. “Now they’re in need of some help.”
Shaftel Diamond, a family-owned jewelry shop founded by Keith Shaftel in 1978, launched its diamond buying division called Diamond Buyer during the 2008 recession.
At the time, jewelry sales had plunged, but people were looking to sell their diamonds. Danny Shaftel, the owner’s son, saw an opportunity to replenish its inventory. The company began purchasing diamonds from across the country through secure FedEx shipments, videorecorded appraisals and wire transfers and checks. Unlike pawn shops that loan money using jewelry as collateral, Diamond Buyer purchases jewelry outright — all sales are final.
‘Out of the woodwork’
Business is picking up again during the coronavirus pandemic, with the company receiving twice the usual number of calls and emails from people interested in selling diamonds. Shaftel said about half of his sellers work in oil and gas, an industry hit hard by furloughs and layoffs as oil prices have plummeted below $20 a barrel.
On a recent Monday, Shaftel returned a call from a north Austin woman looking to sell a 1.7-carat “Crown of Light”-branded diamond ring she said she purchased in Jamaica for $60,000. Shaftel, a gemologist, asked the caller to email him some photos to help give an estimate, but said it’s hard to imagine a diamond of that size would be worth more than $15,000.
“They’re all coming out of the wood works,” Shaftel said after getting off the phone. “To be honest, I would rather nobody call us and not need the money.”