I just read that 90% of the population believes the recession will last at least one year...or more. More importantly, 60% of people have begun to pay down debt, 68% have decided not to make a major purchase and 41% have begun to increase their savings.
On top of that housing prices have fallen three percent to thirty percent depending on where you live.
Add to that the fact that April vehicle sales numbers showed more sales of passenger cars than truck, SUV’s and vans sales—combined. This for the first time in twenty years. Toss on top of that the fact that four cylinder cars outsold six cylinder cars.
So what? Well, this all may be bad news especially if you bought a house six months ago or that Hummer is still in the garage. But it is good news if you have some cash or you are a young couple looking for a house or you need some furniture.
Opportunity knocks because it is a basic economic rule that when demand decreases, prices fall. Everybody knows that but most people will not act upon it. Why? Because it takes a lot of guts to buy when everybody is selling.
So let’s take a quick look at some moves that might look risky now but may pay off big. Take a truck. A fact of life is that trucks don’t get good mileage. Another fact of life is that if you need a truck, you need a truck. You can’t haul a horse trailer with a Prius. Well, you can but not far. And trucks traditionally carry a premium in Texas. But maybe not right now so now is a good time to buy because “If you are turning in a large SUV or pickup, be prepared for a shock when you go to the dealership” according to Edmunds.com, a leading online resource for automotive consumer information.
Risky? Maybe but this columnist puts his money where his mouth is. I bought a SUV. Why? Because we need one as our old one had in excess of 200,000 miles plus it was a good deal--like $5,500 less than they wanted for a similar model at a dealership. Bought it from a lady who just got a company car so she needed to unload this one. I bought it for the amount she needed to pay off the loan. Not a great deal for her but pretty good for us.
How about stocks? Pretty risky? Stocks are always ‘risky’ unless you look at the long-term track record. And people, out of fear, usually sell them as they go down, not as they go up. Warren Buffett noted that stocks are one thing that most people don’t buy when they go on sale. Buffett does which is why he is the richest man on the planet.
How about a house? Pretty risky as prices may go down even more. They may also go back up when the inventory level works itself out. Which it will. Seen much new construction lately? No, which means the supply and demand equation is working. Maybe it is a bit early right now to buy but never too early to start looking for bargains.
I wouldn’t advise people to go overboard on this stuff but bargains don’t come along all the time so keep your eyes open and put that cash to work.