Should We Brace for Deflation Now?

Heather Boushey looks at the possibility of deflation in The New York Times.

Last weekend, we had dinner with a young, newly married couple. They’re renting in our neighborhood and volunteered that they weren’t going to look at buying anytime soon because, “You know, prices just keep falling.” Had this been an evening in the early or mid-2000s, the conversation would have gone very differently, with everyone eager to snap up properties before prices rose even more.

Of course, we all now understand that we were in a housing bubble, but what we often seem to forget is that the repercussions continue to linger on and on. For the young couple seeking to purchase their first home, lower prices seem like a really good thing. And for them, this is true. But as they put off buying that first home, the owners of the starter home they might have bought don’t buy a larger place. Neither family heads to the mall for new furniture, since they aren’t moving, and no one needs new linens or window treatments for their newly painted rooms.

Read more here.

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Heather Boushey

Former Senior Fellow