Source: Photo: a51media

Source: Photo: a51media

We’ve all been hearing about how terrible the recession has been, and that the specter of deflation is providing problems for a slowing economy. However, deflation may not be so bad if you are looking to make some purchases.

Deflation is a general decline in prices. It comes about when the supply of credit and money flow through the system is restricted. Severe deflation, especially if it continues for a long period of time, results in job loss, business failure and shrinking income. However, even though deflation is evident, we are not in a period of severe deflation. Prices on many things have fallen, making this a good time for certain purchases. Before the economy starts to turn around, you might find that now is a good time to buy a few things:

A Home

This is the big one that we all hear about. With home prices still looking for a bottom, and with mortgage interest rates still relatively low, now is a good time to consider purchasing a home. It’s a buyer’s market, and you might also be able to wrangle such deals from the seller as carpet allowances, home repairs, and covering the cost of the home inspection and other expenses. For first-time homebuyers, there are also a number of enticing tax incentives.

Even if you are not in a position to buy a home (either as a residence or an investment property), now might be a good time to refinance. You can get a lower interest rate, lower payments, or shorten the mortgage term — saving you money over the long haul. Provisions under the Making Home Affordable program help those whose loan-to-value ratio is between 80% and 125%. Even if you are upside down, there is a chance you could refinance.

A Car

Now is also a good time to purchase a car. Dealers are slashing prices and offering special incentives. They are trying to move inventory, and that means that you have the upperhand. On top of motivated dealers, the recently implemented Cash for Clunkers program can also provide you with a monetary incentive to buy a car. Some dealers are even matching the incentive offered by the government to double the benefit.


Furniture is also on sale. Furniture sellers often sell at a huge mark-up, and that mark-up is becoming progressively smaller as frugality takes hold of the nation’s psyche. My furniture-salesman brother offers anecdotal evidence that some furniture sellers are to the point of cost + 20%. That means a huge discount as compared to what furniture used to cost. If you are thinking about a new dining room table, now may be the right time to purchase it.

Consumer Electronics

Big screen TVs, cameras and computers are all on perpetual sale right now. Consumer electronics have been relegated to the category of “luxury”, and that means that demand has fallen as consumers do without. Falling demand = falling prices. It is possible to save hundreds of dollars on a variety of consumer electronics right now. Big screen TVs and laptop computers are probably among the most popular items right now, but it is also possible to save money on cameras and personal music devices.

Major purchases should never be taken lightly. However, now is a great time to make some bigger buying decisions. With the slow economy reducing demand, retailers have little option beyond cutting prices in an effort to draw business and beat the competition. If you shop around, and look for extras and incentives, you may find that you can get some truly spectacular bargains. It is important to realize, though, that you should not buy something just to buy it. Evaluate your needs for the next few years. If you plan to buy something within the next 24 to 36 months, it might be worth moving the timetable up.



Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.