Right now, economists are talking about deflation. This is when prices fall. While consumers may not mind deflation so much (as long as income deflation doesn’t come along with it), the economy requires a certain amount of modest inflation for growth. And there is no doubt that, for some things, prices are lower than they have been in years. It’s tough to think about spending money right now, what with the recession, but there are some things that it’s worth buying now. Here are 4 things you should buy now, before the economy picks up again:
- Home: Home prices are quite low. Mortgage interest rates are at 50 year lows. Indeed, it is unlikely that such an opportunity will present itself for at least 30 more years (and maybe even longer). If you are in a position to buy, perhaps you should consider purchasing a home. If you aren’t ready to buy, now could be a good time to refinance. Even if you are concerned about loan-to-value ratio, the President’s foreclosure prevention program allows for that — and you don’t even have to be in danger of foreclosure. I can’t buy (I did in late 2007), but I’m in the process of preparing to refinance — maybe to a 15 year loan.
- Car: We bought a car recently. The prices can’t be beat. Whether buying new or used, the incentives available and the interest rates being offered are amazing. My parents are thinking of buying a car soon, too. They had planned on waiting until next year, but once the economy starts to recovery, prices and interest rates will rise. These deals won’t be around forever.
- Furniture: Furniture is one of those things that has a rather large markup. In times like this, salesmen are willing to make less commission just to get the sale. Instead of a 75% to 100% markup on furniture, things are reduced to a 20% or 30% markup. My brother, a furniture salesman, is now selling things at cost +10% in order to get what he can. If you want a new living room set or a new bed, now is the time to buy.
- Stocks: Stocks are on sale, and you can find several good bargains. Indeed, there are great recession stock possibilities, as well as those that can help you prepare for what many consider is coming: inflation as the economy improves. It is also a very good time to buy dividend paying stocks. And, for the those who are more interested in solid long-term returns, index funds are a great deal.
Of course, if you aren’t planning on buying any of these things in the next year or two, it may not make sense to rush out and buy. Buying for the sake of buying is rarely a good idea. But if you were planning on making some of these purchases anyway, in the relatively near future, it is probably worth it to move up your timetable if you can.