Deflation is Here, What Next?

[Texarkandy]

Isn't it a bit early to declare that "deflation is here"? Has anyone actually seen their wages go down for a few years? Where is the double-digit unemployment rate? Has anyone noticed a sustained drop in the price of goods and services lately? Besides the fall in the price of some assets, I don't see the tell tale signs of deflation right now...

In my admittedly inexpert opinion, I, for one, wouldn't be surprised to see unemployment start creeping on up towards those double digits by next year. People start buying less stuff & houses - companies cut production & layoff - builders stop building & lay off - people start buying even less.

Price deflation - hmmmm, well just thinking out loud I can see it in housing for a while till things shake out (foreclosures, bailout, etc) - but when that's done & not many new houses have been built in the interim - well, the laws of supply & demand should start to rebalance, no? (Housing could take a while though)

I can't imagine the price of lumber, nails, etc (as well as raw materials for other products) deflating much though.

 

[FIREd]

In my admittedly inexpert opinion, I, for one, wouldn't be surprised to see unemployment start creeping on up towards those double digits by next year. People start buying less stuff & houses - companies cut production & layoff - builders stop building & lay off - people start buying even less.

Price deflation - hmmmm, well just thinking out loud I can see it in housing for a while till things shake out (foreclosures, bailout, etc) - but when that's done & not many new houses have been built in the interim - well, the laws of supply & demand should start to rebalance, no? (Housing could take a while though)

I can't imagine the price of lumber, nails, etc (as well as raw materials for other products) deflating much though.

Your opinion is as good as mine, I am no expert either. I am just saying that as of right now, "it is a bit early to declare that deflation is here"... I can't be sure we won't have deflation down the road, but I certainly don't think it is an inevitability either...

 

[clifp]

It seems to me that with massive amount of liquidity put into the system, and every government in the world running the printing presses at warp speed inflation is as least a big a worry as deflation. Massive fiscal deficits especially in the US would normally make future inflation an absolute certainity.

Now I'll admit that the collapse of credit and deleveraging has made deflation a far more plausible and scary possibility than it was a year ago when people first started discussing it. However, I still see an eventual end to the housing crisis when people terrified of the stock market, disgusted with the 2% than can earn in CD/Money Markets, decide that at least they can live in the house and it is cheaper than they were a few years ago and decide to invest in real estate/buy a house.

 

[REWahoo]

However, I still see an eventual end to the housing crisis when people terrified of the stock market, disgusted with the 2% than can earn in CD/Money Markets, decide that at least they can live in the house and it is cheaper than they were a few years ago and decide to invest in real estate/buy a house.

Assuming they can come up with the 20% (or more) down payment likely to be required on future mortgages.

 

[clifp]

Assuming they can come up with the 20% (or more) down payment likely to be required on future mortgages.

True that is big barrier but it is much easier to come up with 20% down for $300,000 house than a $500,000, and it isn't much harder than coming up with the 10% down (50K) for the 500K house.

The good news is the payments are a lot lower even the mortgage is 1/2 to 1% higher

 

[al_bundy]

and the banks will probably look at your income to make sure you can pay the mortgage

 

[HFWR]

Ha, I think you are leaving out a key element in this "logic". Modern American culture is bad/wrong. Depression will change it and will punish those who enjoyed the fruits of their evil ways.

Do I hear an "Amen!"?

Maybe "ahem"...

I think a lot of folks have overly-quaint ideas about the goodle days. If everyone has to carve out an existence on their little patch of land, there'll be a bunch of starving people in no time...

Still, maybe there's a middle ground somewhere between subsistence farming and rampant, debt-fueled materialism.

That ain't workin'
That's the way you do it
You play the guitar on the MTV

 

[Gardnr]

True that is big barrier but it is much easier to come up with 20% down for $300,000 house than a $500,000, and it isn't much harder than coming up with the 10% down (50K) for the 500K house.

The good news is the payments are a lot lower even the mortgage is 1/2 to 1% higher

I saw a bit on TV the other day that showed houses in S. Florida going for $52K, down from $275K at the peak. Just one anecdote but holy cr@p!, that's a big hair cut and I can't imagine them staying that low. And they weren't little dumpy places either; recent construction, never inhabited. Although I really don't know exactly where they were or what the area is like.

 

[REWahoo]

I saw a bit on TV the other day that showed houses in S. Florida going for $52K, down from $275K at the peak. Just one anecdote but holy cr@p!, that's a big hair cut and I can't imagine them staying that low. And they weren't little dumpy places either; recent construction, never inhabited. Although I really don't know exactly where they were or what the area is like.

I saw the same program I think. A couple was interviewed as they walked through their new house (never been lived in) they had just purchased for $92k, down from a price near $300k. The lady couldn't stop grinning.

 

[Florida]

I saw the same program I think. A couple was interviewed as they walked through their new house (never been lived in) they had just purchased for $92k, down from a price near $300k. The lady couldn't stop grinning.

That's amazing
Anybody remember what TV show that was.

 

[REWahoo]

Florida, I think it was on either the NBC or ABC evening news.

 

[Florida]

Florida, I think it was on either the NBC or ABC evening news.

Thanks, I would like to know what area that was. I will check NBC and ABC websites.

 

[ziggy29]

Thanks, I would like to know what area that was. I will check NBC and ABC websites.

Looking to pick up a cheap rental?

 

[Florida]

Looking to pick up a cheap rental?

A primary.