One of the highlights of consumer spending has regularly been the steady splurging of the topmost spenders. Like people who didn't blink when the $600 iPod debuted this summer. So my thinking is if that group stalls out, it is a sign the rest of us won't have much extra cash.
Apple stunned the business world by announcing sharp price drops, and along with other indicators, there are suspicions this means something.
But the gonzo cuts can have negative results after the initial frenzy. First, it makes chumps out of the customers who made the product a hit—and profitable at full price—in the first place. Early adopters who paid through the nose for the new iPhone, were iPissed when they realized that their technologically less-forward neighbors could get the exact same product for one-third less a few weeks later. In response to an avalanche of angry e-mails, Jobs responded that he really cut the price in order to help all those who paid $599 for it. "It benefits both Apple and every iPhone user to get as many new customers as possible in the iPhone 'tent.' We strongly believe the $399 price will help us do just that this holiday season." How would you feel if you bought a condo in a Hovnanian development last month, only to find that your new neighbor paid significantly less for the exact same floor plan? [More]
A softening general economy could mean even lower interest rates, as Fed action and recent comments this week seems to indicate less concern with inflation and more with growth.
Where will land prices go if mortgage rates slide back down?