ANNAPOLIS – Couches costing $3,500 are flying out of Danzinger’s Designs, an upscale furniture store in Bethesda, at a rate twice as fast as last year.
In Annapolis, yacht salesman Al Gundry said big boats are “selling like there’s no tomorrow.”
While much of the state’s economy struggles to sustain a still shaky recovery, some Marylanders are now splurging on luxury items, thanks to sudden extra cash from tax-cuts and home refinancing.
“We saw refund checks going out, all of this caused consumers to feel good about spending that money – it’s like a windfall,” said Pradeep Ganguly, chief economist at the Department of Business and Economic Development. “What do you do with a windfall? You go out and do something you haven’t done before.”
It’s a trend that economists expect to continue through the holiday season.
“Status goods sell well in good times, and good times are picking up. . . . It’s going to be a good Christmas for luxury goods, stockbrokers and real estate agents,” said Peter Morici, former chief economist for the U.S. International Trade Commission.
Much of the new spending seems to focus on personal appearance.
That means increased profits for upscale designers and high-end jewelry retailers like Tiffany’s, Morici said.
“People have some money again to spend on Gucci purses, and they are,” Morici said, “Looking good has become important again. People are spending money on themselves. . . . This is good a year for Coach, Prada . . . It’s a good year for people like that.”
That mentality is evident in other areas of the market, especially automobile sales.
“Hummers are moving pretty good.” said Neil Kopit, director of Criswell Auto.
Pricey, flashy accessories are especially popular, he said. “Chrome wheels, TVs, carbon fiber, dash kits. It’s just cooler. It’s a look.”
At Lexus of Silver Spring, sales have seen a “very decent 7 to 8 percent increase,” said Manager Ali Toosi. “We’ve seen a tremendous influx of people from other brands.”
However, mid-priced vehicles aren’t moving nearly as quickly, Kopit said.
“Mercedes is doing well. Audi is doing well. Ford, Chevrolet, mainstream stuff, middle-middle (and) lower class are not fairing quite as well,” he said.
That’s partly because money for these extravagant purchases is generally coming from one-time gains, said Ganguly.
“Even people with modest incomes, when they have an influx of cash, it typically has an impact on impulse buying,” Ganguly said.
A rising real-estate market and lower interest rates have enabled more homeowners to refinance. The lower mortgage payments result in extra cash flow, he said.
“What’s happened is they lower their current monthly payments; that frees up extra. If even if a small percentage of them go out and buy a luxury item, it tells you more people have disposable income,” Ganguly said.
“People have been refinancing and that has been keeping economy from going in the pale and now helping it really boom,” Morici said, “Those high-priced houses have a way of becoming Lexus automobiles and St. John suits.”
Naturally renters, who, by and large, make less than most homeowners, can’t take advantage of refinancing, Ganguly said.
Wealthier Marylanders were also more likely to benefit from the Bush tax cut, which Ganguly also credits with bolstering consumer spending.
But the demand for designer clothing and fur coats doesn’t necessarily indicate a long-term rosy forecast for the rest of the economy.
“It’s a one-time cash bump. Sooner or later it will stop happening,” Morici said, “Until we start creating jobs, we don’t have a sustainable recovery.”