Why gun prices have gone through the roof and ammunition is scarce is explained by the same psychology that doubled housing prices in five years. We are witnessing a bubble -- a market that is driven by irrational demand for a product -- that is no different from any other bubble, whether it be a stock market bubble or a housing bubble. Bubbles burst and this one will, too.
I suspect that fear of gun regulation is part of the reason. But, only a part. What fuels bubbles is the irrational sense that if I don't get mine now, I won't ever be able to get it. You see that model 27 you've always wanted, and they're asking $250 more for it than the market price of six weeks ago, but you reach for your wallet all the same because you suddenly think "if I don't get this one I'll never find another."
Bubbles burst when the price of commodities exceeds what buyers are willing to pay. Usually, there will be a period where sellers continue to demand above-market prices even if their products aren't moving because they won't admit that the bubble has burst. Then, sooner or later, the sellers bend and the prices fall.
I'm confident that this will happen in the gun market even as it has happened with other bubbles. First, the fear of gun regulations is truly irrational. There currently is a pro-gun majority in both houses of Congress and, frankly, Obama has bigger fish to fry than to get into a fight over gun control. So, I expect no gun legislation will get through Congress in the foreseeable future. In time, that realization will sink in. Furthermore, demand for guns is no different from demand for other commodities. Inevitably, the prices asked will exceed that which people want to pay.
I've noticed that, on Gunbroker, there are a lot of guns with apparently sky-high reserve prices that are getting no bids. That may be the first sign that sanity will prevail.
