Make us your home page

Why falling prices aren't necessarily good for us

There's a new danger confronting our economy. Price-savvy consumers and businesses are getting accustomed to waiting — just a little bit longer — before buying stuff because what's cheap today will probably be cheaper tomorrow.

Realtors know best what I'm talking about. Check out the table of area real estate prices at the end of this story. Since 2006, existing homes prices in the Tampa Bay area have dropped like a rock. The current median price here is now lower than it was four years ago. Every indicator and expert say home prices will fall farther.

A home that sold for $222,000 in 2006 can now be had for closer to $160,000 — more than one-quarter off in just two years. That's a pretty good incentive to wait for prices to drop even more.

The same attitude can be found in holiday shoppers. Why buy now when it's almost a sure thing stores will drop prices more and put additional goods on sale in the coming weeks? No wonder retailers have nightmares this year.

In fact, the consumer price index, which tracks price change in basic household goods, had its largest decline since World War II in October.

The result? Huge numbers of buyers are waiting on the sidelines. And that's forcing an already precarious economy to slow even more.

In the language of economics, we are facing the potential threat of "deflation" — when we may be entering a period of recurring declines in overall prices. If deflation does occur in the United States, it will be something most people have not experienced, says Merrill Lynch economist David Rosenberg.

The deflation threat is reinforced by fears of a worsening recession, rising job insecurity, tougher lending standards, and a Dow stock market index that closed for a few days last week at once-unimaginable lows below 8,000.

But what's so wrong with deflation? Surely it's less toxic than the more familiar inflation, when prices for most things are going up faster than your paycheck.

After prices of so many things soared for so long, I'm rather enjoying the promise of store bargains, gas prices dropping under $2 a gallon and crude oil sinking under $50 a barrel. As a homeowner, I'm losing equity as prices drop, and thankfully I'm not trying to sell my house at the moment. But I can reluctantly appreciate buyers who can find more affordable housing.

But my flirting with deflation is misguided. It has a nasty side. If consumers hold back on purchases to await deeper price cuts, a deflationary spiral can arise.

Here's how it works. If consumers don't buy, companies cut back production. That can lead to job losses which lead to less spending. Then it starts anew. It's a spiral that experts warn is hard to break.

One way to fight deflation is to lower interest rates. But rates already are down from 5.25 percent 14 months ago to 1 percent today. If deflation strikes, the Federal Reserve has little room left to cut rates.

Information from the Associated Press was used in this column. Robert Trigaux can be reached at

As prices drop, we wait

Floridians are conditioned to hold off on buying homes because median prices have dropped dramatically since 2006. So shoppers now "wait" for even lower prices.

Sept. 2008$160,500 -20%

Sept. 2007$200,700 -10%

Sept. 2006$222,100 +3.2%

Sept. 2005$215,200 +28%

Sept. 2004$168,400 +18%

Sept. 2003$142,300 +9%

Sept. 2002$136,700 +3.2%

Sept. 2001 $132,400 +7%

Sept. 2000$123,700 --

Source: Florida Association of Realtors, single-family, existing homes

Why falling prices aren't necessarily good for us 11/22/08 [Last modified: Tuesday, November 25, 2008 10:18am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours

  1. Author Randy Wayne White could open St. Pete's biggest restaurant on the pier

    Food & Dining

    ST. PETERSBURG — The story begins with Yucatan shrimp.

    St. Petersburg Deputy Mayor Kanika Tomalin, pilot Mark Futch, Boca Grande, St. Petersburg Mayor Rick Kriseman, and author and businessman Randy Wayne White,  Sanibel, exit a Maule Super Rocket seaplane after taking a fight around Tampa Bay off the St. Petersburg waterfront, 6/28/17.  White and his business partners are in negotiations with the City of St. Petersburg to build a fourth Doc Ford's Rum Bar & Grille on the approach to the St. Petersburg Pier with a second event space on the pier according to White. The group met near Spa Beach after a ground breaking ceremony for the new pier. "We want to have our business open by the time the pier opens," said White. Other Dr. Ford restaurants are located on Sanibel, Captiva and Ft. Myers Beach. SCOTT KEELER   |   Times
  2. Guilty plea for WellCare Health Plans former counsel Thaddeus Bereday


    Former WellCare Health Plans general counsel Thaddeus M.S. Bereday pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District …

    WellCare Health Plans former general counsel Thaddeus M.S. Bereday, pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida stated Wednesday. [LinkedIn handout]
  3. DOT shows alternatives to former Tampa Bay Express toll lanes


    TAMPA — State transportation officials are evaluating at least a half-dozen alternatives to the controversial Tampa Bay interstate plan that they will workshop with the community for the next 18 months.

    Florida Department of Transportation consultant Brad Flom explains potential alternatives to adding toll lanes to Interstate 275 during a meeting Wednesday at DOT's Tampa office. Flom presented seven diagrams, all of which swapped toll lanes for transit, such as light rail or express bus, in the I-275 corridor from downtown Tampa to Bearss Ave. [CAITLIN JOHNSTON | Times]
  4. Claim: State pressured CFO, used secret recordings to shut down Universal Health Care


    ST. PETERSBURG — The founder of St. Petersburg's Universal Health Care alleges that Florida regulators conspired with the company's chief financial officer to drive the once high-flying Medicare insurer out of business.

    Federal agents raided the headquarters of Universal Health Care in 2013, ordering employees to leave the building. The insolvent St. Petersburg Medicare insurer was then in the process of being liquidated by state regulators.
[DIRK SHADD   |   Times file photo]

  5. Aramis Ayala defends stance against death penalty: 'I did what I believe was proper'

    State Roundup

    TALLAHASSEE — Orlando prosecutor Aramis Ayala on Wednesday defended her "absolute discretion" to never seek the death penalty in murder cases, as skeptical justices of the Florida Supreme Court bombarded her lawyer with sharp questions.

    Orlando prosecutor Aramis Ayala, far right, said she was "very well pleased" with her lawyer's case. "I violated no laws." [STEVE BOUSQUET | Times]