Mostly sudden paranoia. They'll be a substantial effect. We're seeing it this year. Our profit over expenses and what we pay ourselves is down $60,000 for the year. We expect a poor Christmas season.
The root cause is likely the rise of credit as a way to live rather than saving as a way to get things. Fortunately a good number of people never gave up the concept of using money one has rather than money one hopes for.
Young city people in particular seem to live on borrowed funds. We have a number of lake houses along our stretch of water that have stalled. Owners seemed so young. Well, they're stalled in renovation because the money dried up. In chatting with a couple of these folks and following up on that information, I've found that many young people think borrowing 100% of the money to buy things of certain depreciation or uncertain future value is OK. As opposed to saving the money, then purchasing. A typical example in this area is a fellow who borrowed 100% (through 2 loans) of his primary residence money, then leveraged something or other into almost 100% of a lake house, then borrowed money for renovation of about 20% of the cost of the house. So he has a lot borrowed. These two houses are now worth less than when he started out by maybe 20%, so he's terrified. I figured he was well off. Turns out his big truck is worth less than he owes, his Toyota is worth less than he owes. He borrowed everything!!! What if one of them loses a job? They must be paying 30% or more of what they make in interest! And he says that's not uncommon. Talked to some bankers and they indicated the same thing. Can hardly talk people out of leveraging a "job" with a "steady" income into massive debt.
I get looked at oddly by most younger people when I explain (after comments on the age of my cars) that I won't buy anything I can't pay for right then. Sometimes I have to explain what I mean - the concept of paying for things is so alien. "You mean you just write a check for a CAR??!!" My answer is "No. I walk in with car and start bargaining hard." That's really alien! If someone wants to chat about it, I explain that my house is 80% paid for and I hope to finish that off in the next few years. And that everything I own except the house I actually own free and clear. No credit card debt, nothing. And that if you count my business worth, I'm a non-liquid millionaire.
It's really funny. The majority of the flashy car driving folks I get to know are in hock up to the eyeballs. All the wealthy people I know (ones I know are solidly wealthy) live quite modestly and drive relatively inexpensive vehicles, dress modestly. The exception is, of course, that we fiscally conservative folks ride really hot bicycles!!!
And that's the root cause. For the country, too. I notice both our candidates shy away from how to pay for their proposed programs! Any shift from the most amazing borrow & spend government we have now will be welcome!
Regardless, they'll be a reckoning that will have us all tightening our belts. Mine won't tighten much at all. I'll put in a truck garden again and get a motorcycle. Whoopie. Other people in the area will have to dump their 80% finished houses for nothing. I may get a couple of them myself!
Be well, save money, pay cash. Negotiate.