Lack of inflation smiles on buyers of distressed real estate on clarkhoward.com

CLARKONOMICS: Headlines can sometimes be misleading.

The big financial news of the day was that consumer prices in the month of June went up by seven-tenths of a percent. But monthly stats don't give you the entire picture. For example, the reason for the run-up can be tied to rising gasoline prices in June.

A more important stat to note is that there was no inflation to speak of over the last year. So a dollar today buys you more than it did a year ago. In fact, The Wall Street Journal reports that prices overall are declining by the biggest amount seen since 1950.

Prices will continue to get better on most things we buy. That means even if you didn't get a raise this year, your purchasing power has not declined.

Consider the implications for the housing market. Buyers can afford to sit and wait until prices drop even further. And sellers and banks with foreclosures will have to go into deeper price capitulation and lower their asking prices.

In Clark's estimation, today's financial news means there's no sense of urgency for buyers of distressed property to rush out and buy just yet. Better deals are still ahead of us.

What others are saying

Inflation
The inflation numbers are bogus.
The government wants to show low cost on living expenses to keep social security payments lower. Over 51 million people are collecting social security and that number will increase
dramatically each year---baby boomers getting older.
By Tim @ 07/20/09 10:27:11 PMreport abuse
Inferior Goods
I have been interviewed by BLS at two different times. They asked me very non-specific questions. Did you buy any clothes in the past month? Yes, I bought a sweater. What did you pay for the sweater? I paid $20.

This type of questioning does not account for switches to inferior goods during a recession. BLS calculates no inflation because people are buying cheaper items.
By z @ 07/16/09 09:04:33 AMreport abuse
Inflation
I heard that the unions years ago had to concede to having housing (among other things)removed from the Cost Of Living Allowances equation/formula in their contracts. Housing prices were on the rise back then and this formula change kept wages for the working man stagnant.
By Dave @ 07/15/09 05:37:00 PMreport abuse
Inflation rate is short-sighted
The reported inflation rate doesn't take into account everyday items that we all use en-masse, and it doesn't take into account the declining income levels across the board.

That said, I suspect that the true unemployment figure nationally is around 15% already and a realistic annual inflation rate is closer to 7%. I think our leaders are padding the figures to maintain approval ratings and the favors of Congress. But let's face it: Congress isn't doing anyone a favor lately with all this wild, drunken spending of money we don't even have, or could ever hope to print. Only China is pulling that off presently. (They print tons of currency and use it to buy U.S. goods. Great way to shore up their economy, but it hoses the U.S. bigtime.)

And yes, I agree: we are going to struggle with this mess for at least another 10 years --longer, if the U.S. Government doesn't stop meddling in the affairs of private industry.
By Another Old Guy @ 07/15/09 05:34:55 PMreport abuse
My Prediction Is....
That we are going to be in recession/depression for another 10 years. That it may not dip down much lower, but that it will remain at a steady line or course of where it is now. It will not go up for another decade. That grossly over priced inflated real estate, cars, textiles will drop and stay at the true value of their worth if we never had any preditory leading practices swindling people in the first place.

The 20/80 loans allowed people to buy into houses that they would have never been able to afford if they had to save the 20 to 30 % down to buy in a certain neighborhood. Others, had the down, but chose not to spend it and go with a 100% loan and keep their savings. Savings that was often sqwandered on home furnishings for now foreclosed homes.

The only "axcess of evil" I see the corrupt billionaires at the top.
By PennyPincher @ 07/15/09 04:22:42 PMreport abuse
Declining Prices
The rate of inflation as determined by our governemt figures tracks only certain goods. From my perspective I see very little deflation and allot of inflation in non-tracked goods. I suspect that the rate of inflation is closer to 5% without gasoline involvement. There ought to be a better, more extensive measure of inflation.
By John @ 07/15/09 04:01:39 PMreport abuse
A Dollar's "worth"???
U said on radio today(7-15) that a dollar purchases MORE than it did a year ago.
HUH? Have u been grocery shopping lately?
By Mike Bair @ 07/15/09 03:56:17 PMreport abuse

Inflation

The inflation numbers are bogus.
The government wants to show low cost on living expenses to keep social security payments lower. Over 51 million people are collecting social security and that number will increase
dramatically each year---baby boomers getting older.

By Tim @ 07/20/09 10:27:11 PMreport abuse

Inferior Goods

I have been interviewed by BLS at two different times. They asked me very non-specific questions. Did you buy any clothes in the past month? Yes, I bought a sweater. What did you pay for the sweater? I paid $20.

This type of questioning does not account for switches to inferior goods during a recession. BLS calculates no inflation because people are buying cheaper items.

By z @ 07/16/09 09:04:33 AMreport abuse

I heard that the unions years ago had to concede to having housing (among other things)removed from the Cost Of Living Allowances equation/formula in their contracts. Housing prices were on the rise back then and this formula change kept wages for the working man stagnant.

By Dave @ 07/15/09 05:37:00 PMreport abuse

Inflation rate is short-sighted

The reported inflation rate doesn't take into account everyday items that we all use en-masse, and it doesn't take into account the declining income levels across the board.

That said, I suspect that the true unemployment figure nationally is around 15% already and a realistic annual inflation rate is closer to 7%. I think our leaders are padding the figures to maintain approval ratings and the favors of Congress. But let's face it: Congress isn't doing anyone a favor lately with all this wild, drunken spending of money we don't even have, or could ever hope to print. Only China is pulling that off presently. (They print tons of currency and use it to buy U.S. goods. Great way to shore up their economy, but it hoses the U.S. bigtime.)

And yes, I agree: we are going to struggle with this mess for at least another 10 years --longer, if the U.S. Government doesn't stop meddling in the affairs of private industry.

By Another Old Guy @ 07/15/09 05:34:55 PMreport abuse

My Prediction Is....

That we are going to be in recession/depression for another 10 years. That it may not dip down much lower, but that it will remain at a steady line or course of where it is now. It will not go up for another decade. That grossly over priced inflated real estate, cars, textiles will drop and stay at the true value of their worth if we never had any preditory leading practices swindling people in the first place.

The 20/80 loans allowed people to buy into houses that they would have never been able to afford if they had to save the 20 to 30 % down to buy in a certain neighborhood. Others, had the down, but chose not to spend it and go with a 100% loan and keep their savings. Savings that was often sqwandered on home furnishings for now foreclosed homes.

The only "axcess of evil" I see the corrupt billionaires at the top.

By PennyPincher @ 07/15/09 04:22:42 PMreport abuse

Declining Prices

The rate of inflation as determined by our governemt figures tracks only certain goods. From my perspective I see very little deflation and allot of inflation in non-tracked goods. I suspect that the rate of inflation is closer to 5% without gasoline involvement. There ought to be a better, more extensive measure of inflation.

By John @ 07/15/09 04:01:39 PMreport abuse

A Dollar's "worth"???

U said on radio today(7-15) that a dollar purchases MORE than it did a year ago.
HUH? Have u been grocery shopping lately?

By Mike Bair @ 07/15/09 03:56:17 PMreport abuse

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Jul 15, 2009 -- Lack of inflation smiles on buyers of distressed real estate

What others are saying