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Yep. Leading edge Boomers (heck, all Boomers, for that matter) who counted on inflated home values as a major compenent of their retirement made a very serious mis-calculation. A lot of them will be increasingly frustrated as the years roll by and only a very modest recovery of values occurs rather than the return to insane values that they are hoping for. Oops - frugality in retirement will be forced on them despite all their whining and complaining. By the way, I am 68, but I don't mind criticizing my own generation.
There will continue to be more and more of a push to unload this debt on the up and coming generation. It's already happening with ZIRP, expanding the GSE's and FHA loan limits, housing subsidies or tax deductions, etc. Everything is about getting this new generation into loans and debt to help maintain current pricing and every solution is to expand credit availability. But you're right, in the end the demographics will overwhelm prices as boomers try to unload their homes. It's a shame a whole generation bought into their house as their largest single investment, and then let it influence policy in the way that it has.
If you buy a lower end model (under $25k) and keep it for 6 years, putting on 80,000 miles, you will be generally in the range of someone who bought a 10 year old car for $5,000.
How you ask?
My car was $23k OTD and has a 100,000 mile warranty on the power train.
Maintenance for 80k miles:
2 sets of tires: $800
13 oil changes: $400
General Maintenance: $400
Total: $1600
Resell at 80,000 miles -- $7,000
Total cost of car
$17,600
10 year old car:
New timing belt : $1000
3 sets of tires (assuming not brand new when purchased: 1200
13 oil changes: 400
Repairs $6000 (springs, shocks, alignment, muffler, electronics, starter, battery etc)
Total cost $8,600
Reselling car at 170,000 miles: $1000
Total cost $12,600
So yes, a brand new car would cost $5,000 more... But it's brand new and not 10 years old. It's going to be more reliable with new technology, be safer, and probably ride nicer. Might even be better on gas mileage too. I know my old 97' Camry 2.2L 4 cyc would get 21 city and 28 hwy when I got it with 120,000 miles on it. Now a days, the new camrys get 27 city and 35 highway, which over 80,000 miles would amount to a fuel savings of about $2,700 at current fuel prices, cutting the cost of a new car to only $2,300 more.
Pretty negligible expense over a 6-8 year period.
These sound like some pretty gross estimates that hold little value since it depends on many different factors, like how often you drive, how you drive, the model, where you live (average cost for repairs, climate, and terrain), fuel prices, etc. Based on your numbers, it looks like you take your car to a Jiffy Lube for the oil changes when it's cheaper to do it yourself. I think it really varies on a case by case basis. Some cars are lemons while others prove to be quite reliable.
I'm not quite sure what the average cost for replacing a timing belt is, but a quick google search suggests no more than $700. $1000 sounds a bit steep. A friend of mine recently paid somewhere between $500-600 for theirs.
Timing belts are usually replaced with water pumps as well, to save on labor cost. The cost is typically $700-800. Most newer cars today have chains, which don't even need to be replaced.
There will continue to be more and more of a push to unload this debt on the up and coming generation. It's already happening with ZIRP, expanding the GSE's and FHA loan limits, housing subsidies or tax deductions, etc. Everything is about getting this new generation into loans and debt to help maintain current pricing and every solution is to expand credit availability. But you're right, in the end the demographics will overwhelm prices as boomers try to unload their homes. It's a shame a whole generation bought into their house as their largest single investment, and then let it influence policy in the way that it has.
I doubt this. Boomers tended to buy homes in desirable areas that Gen-Xers covet. I do think there will be problems maintaining prices in the exurbs since people tend to live out there more out of necessity and the 20 somethings don't seem to have as much interest in buying into that lifestyle.
As a 26 year old it's because my career path has not been what I hoped and as a result I don't have much money.
I can relate... when I graduated it was the worst unemployment since the Great Depression... all the campus job fairs were for show... no one was hiring.
Decided to work for myself till something better came along... it was great to be young with lots of energy and ideas...
Buying a run down shack was the best decision I ever made... fixed it up as I could afford to and learned a lot about people and construction... later, I rented it and bought the next fixer... Couldn't get a loan on the first one till I had it fixed... then I got a modest mortgage and used that money to buy the next and so on...
Still can't get over the fact that I thought a mortgage at 13.75% was a good deal... times really have changed.
I didn't get my first real office job until I was 28 and didn't buy my first house till I was in my mid 30s. Part of it may be where you live. Where I do now, Northern Virginia, it seems to be relatively easy for kids just out of school to find a career type position.
I don't see a use for a house right now. I'm 27 renting an apartment and bought a used car 2 years ago. I don't buy a house because it makes me to unflexible plus it's to much of a headache. I'll buy house once I'm settled and married. I rather put a big chunk of my earnings away instead of blowing it away on interest payments for a mortgage.
I doubt this. Boomers tended to buy homes in desirable areas that Gen-Xers covet. I do think there will be problems maintaining prices in the exurbs since people tend to live out there more out of necessity and the 20 somethings don't seem to have as much interest in buying into that lifestyle.
Also, look at the demographics of those exurban areas. Outside of a few exceptions like DC and a few other spots they tend to be far more conservative with lower levels of educational attainment. Most of these exurban areas are already in decline and will not hold much appeal to millenials.
There will continue to be more and more of a push to unload this debt on the up and coming generation. It's already happening with ZIRP, expanding the GSE's and FHA loan limits, housing subsidies or tax deductions, etc. Everything is about getting this new generation into loans and debt to help maintain current pricing and every solution is to expand credit availability. But you're right, in the end the demographics will overwhelm prices as boomers try to unload their homes. It's a shame a whole generation bought into their house as their largest single investment, and then let it influence policy in the way that it has.
What your calculation fails to take into consideration is the new boomer generation being created by immigration and the family size of the new immigrants. Population in the US is, and will continue to expand and the supply of housing for the present is staying stagnant.
I own rental housing, and am purchasing more currently. I do it to make money. If people like me can purchase and rent property and make a profit, then it is hard to understand how it is a bad investment for the average homeowner.
There are 2 keys to making money in real estate. The first is to buy less than you can afford and make additional principal payments in order to pay it off in 10 to 12 years. Then you have cut the largest expense most people incur down to taxes, insurance, and upkeep for the remainder of your life. Eliminating the majority of your housing costs allows you to invest more and accelerates your wealth accumulation in the following years.
The other key is to buy the worst house in the best neighborhood you can find, and spend your weekends working on it instead of watching football and drinking beer.
There is money to be made in being a homeowner but it takes hard work, most people just are not willing to pay that price.
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