By Brad Berger, Cornerstone Financial Strategies LLC
While the stock market may have enjoyed a healthy six-month rally, and the economy has been getting a little less wobbly, Americans are still worried. While the bottom has stopped falling out from under us as it did during the 2008 and early 2009 meltdown, the economy remains weak. Demand may not return to its 2007 highs for things like houses, cars, and even high-end clothes for years!
When demand for something falls but the supply remains the same, prices have to fall in order to move the merchandise. This is true of services as well as goods.
If you are in the business of delivering goods and services with limited demand, this can mean severe hardship—possibly even business failure or bankruptcy. But if you are in the market to buy, things are quite different. Today, we see “buyer’s markets” in just about everything. Consider what the Wall Street Journal had to say about home remodeling:
People who refrained from splurging on big home-improvement projects during the housing boom are reaping the rewards now.
Depending on the region and the job, some homeowners are paying as much as 20% less for home-remodeling projects than they would have a few years ago. Many contractors are willing to accept smaller jobs and “handyman” projects that they used to snub. And more projects are being delivered on time and on budget—a stark contrast from the boom years.
Source: “Why Homeowners are Raising the Roof”
The holiday shopping season is almost here. Retailer expectations are fairly low this year, but shoppers might not quite see the bargains they did last season. In 2008, the stores were stocked based on the huge demand from the preceding years. This year, they have “right sized” their inventories to better match the mood of the times. Still, even if prices are a little higher than during last year’s blowout, I suspect that shoppers will find more than a few bargains out there.
Our economy is geared for a higher level of output than current demand would justify. It may some years for supply and demand to favor the seller again. So, in our careers and businesses, we should be cautious. But in our personal spending, we should enjoy the bargains as we see them.