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What do the two statements above tell you? Looks to me like the drop in net worth for seniors was largely if not entirely a change in home value. 2007 home values were inflated by the housing bubble, so that "value" was largely fictitious, and therefore the decline in "equity" is substantially overstated. And a primary residence shouldn't be included in net worth to begin with since it's not a liquid income source in most retiree's plans (you have to live somewhere). Seniors lost little if anything in the value of their homes, there's nothing to recover.
As for the rest, we've heard your senior biased views on interest rates and your views on the Fed...
Net worth is net worth and seniors had a reasonable expectation that they could liquidate and use the equity for their retirement. Instead, the government (which is bought off by the banks) together with mortgage lenders (who became shadow institutions of the banks) totally went wild in overbuilding which ultimately caused a vast oversupply of homes of all types which led to a crash in all home values - everyone who owned a home had to watch helplessly as their homes were devalued by a government/private banking sector gone wild for their own profits (they simply skimmed the money off the top),
if you have a home with a mortgage then refinancing at 3-4% will save you a bundle too.those low rates are only low because the economy sucks.
A debtors gain is a saver's loss. It nets out to nothing for economy but does punish savers in favor of debtors. The result is a nation that has a debt that is impossible to repay other than by an enormous amount of default by individuals and corporations and/or inflating the dollar which diminishes overall standard of living. It is actually happening in the U.S. but in slow motion so we don't notice that our food and homes are getting dingier day by day. It is called mass conditioning. Wages are down. Labor force participation is the lowest since measurement began. Medium net worth is down 40%. The Federal Reserve didn't save us from a depression. They merely shifted wealth around (extracting money from savings) so that the pain is universally felt over a longer period of time. Cute trick. They also managed to create a world-wide recession/depression by destroying the value of money everywhere.
all assets at one time or another run into mis-pricing issues. whether it was gold at 850 ,the nasdaq at 5000 or the run up in homes that ran 5x what the typical year brought in home appreciation.
folks who bought during these mis-priced periods of time got burned, plain and simple .. that doesnt mean those mis-priced assets are the determining factor for judging them.
so now that the mis-pricing was corrected everyone who owns a home wants it to go back to those mis-priced prices and blames everyone and everything for their mis-fortune.
things got over valued and they came down in price just like they have done the last 100 years.
a pricing correction doesnt amount to a fed plot, a scheme or any other of this mumbo jumbo about the manipulation of things.
there may have been many reasons things got over valued ,there always is but the fact is like water, prices seeked out their own levels again. that doesnt mean the correction in prices shouldnt have happened.
it had to, prices got ahead of themslves.
like those who invest in any asset class, we assume the risk of events destroying the value of that asset class. if you didnt well that was poor planning betting your house was a piggy bank when it was appreciating at 5x the typical rate..
no different than the fact we had 2 back to back recessions and the markets performance reflected that. yet there are those who are clueless and blame everything for their poor investment performance.
if the markets were up i would scream manipulation but they are just the messengers for whats happening and future perception. until we can outlaw the business cycle recessions are a fact of life.
you may have a vendetta against the fed but your spending way to much time dwelling on it and trying to make links to things that had to correct regardless.
retirees are going to see this same correction happening to their bond funds that they ran to in hordes for protection from the storms .
once interest rates start to rise again these folks who have never lived through a bear market in bonds will freak when their bond funds fall by 8-10% for every point rates rise . again they will cry foul play but its their own lack of understanding their investments that will get them and no one else. so now we will hear how the rising rates are killing retirees savings .
they will watch in horror as their bond funds plummet and if they own individual bonds they will be horrified when they have to liquidate individual bonds at a principal loss if they need to refill spending
cash before maturity. either that or they will moan they are only getting 1 to 2% and being eaten alive by inflation while rates are double and triple that eventually if they are holding until maturity.
whether rates fall or rise the fact is not everyone will be happy and there will always be those who cry foul play even though its their own mis-understanding of their investments.
i can guarantee you this though , the same folks who are complaining about the low rates will complain about the rise in rates killing their life savings.
the headlines will all be about how retirees net worth is dropping and they are losing a lifetime of savings as their fixed income investments fall in value against the rising rates.
Last edited by mathjak107; 06-15-2012 at 04:04 AM..
one other point is retirees and investors had choices too. if you were well diversified the 30 year bull market in bonds was amazing. it did better than any asset classes gained or lost.
falling rates to savers who were in bonds and treasuries was a fabulous thing. the fact is many retirees and investors tossed their money into the stock market or real estate and little into treasuries .
again it amounts to poor investment choices or not enough diversification into other assets . you thought you could predict and were smarter than the markets.
well the markets showed all of us just how bad we are at predicting. how ofton did you see 30 year treasury bonds on wall streets recommeneded buy list the last 30 years? never!..
the point is if your were in the wrong asset classes for the time frame dont blame anyone but yourself or your broker for bad planning.
retirees saw their bond holdings soar in value with falling rates if they didnt hide under a rock in the bank or avoided buying them...
Last edited by mathjak107; 06-15-2012 at 04:06 AM..
Every adult American needs a lesson in demand curves. We need to understand that at any given price point there is x demand for a given item. As the price goes up the demand usually goes down and as the demand goes down the price usually goes up. If you have 100 houses in a neighborhood all similar and one sells for 500K that does not mean there are 100 other people willing to pay 500K for one. There may have been only one perhaps two people. Once they buy the next point where there is demand might be 490K etc. Nothing is really worth anything until it sells. Housing bust was very predicatble as we were running out of people able or willing to pay the high prices. It was at the time being sustained by liar loans, marketing and risky loans. It was clearly inevitable that it was a bubble certain to bust the only question was one. It was in thousands of public discussions. If you wanted to max out you had to get out before the bubble burst. The only question was how bad and that was not real difficult to figure out either. Sustainabilty is relevant in both price and demand. It is like oil prices. Demand destruction is inevitable with price increases.
Net worth is net worth and seniors had a reasonable expectation that they could liquidate and use the equity for their retirement. Instead, the government (which is bought off by the banks) together with mortgage lenders (who became shadow institutions of the banks) totally went wild in overbuilding which ultimately caused a vast oversupply of homes of all types which led to a crash in all home values - everyone who owned a home had to watch helplessly as their homes were devalued by a government/private banking sector gone wild for their own profits (they simply skimmed the money off the top),
You've completely missed the point (again).
"Net worth is net worth." So whenever it goes up it's deserved and whenever it goes down it's someone else's fault? It's going to fluctuate for almost all of us.
The 2007 net worth figures aren't real to begin with as they are largely based on (bubble) inflated home values. The decline in net worth from 2007 for all age groups is overstated, based on a windfall thanks to the housing bubble.
It is not a "reasonable expectation" that the 65-74 age group would liquidate their primary residence for retirement. They have to live somewhere? Selling your primary residence for retirement funds is a last resort for most retirees, not "plan A" for anyone with a viable plan.
BTW incomes rose for the 65-74 age group from $40.8 in 2007 to $42.7 in 2010. They also rose for the 75+ age group. Unlike everyone 64 and younger.
And the mean net worth for 75+ age group actually increased from 2007 to 2010, unlike any other age group.
It would appear seniors have fared better than other age groups. But proceed with your self-serving agenda...
[*]It is not a "reasonable expectation" that the 65-74 age group would liquidate their primary residence for retirement. They have to live somewhere? Selling your primary residence for retirement funds is a last resort for most retirees, not "plan A" for anyone with a viable plan.
I would suspect that many who sell the homestead at that age are doing so to go laterally into a condo (and perhaps using home sale profit to cover condo fees) or using the entire profit to buy into a 55+ community or maybe assisted living. These "entrance" fees are generally the amount of the sale of a decent home. The home cannot be counted as an asset at any rate. In the years when it was, elderly sold very late, just before or at the nursing home stage, or they went to live with relatives.
just because prices get out of whack for a bit doesnt mean that point is the new reference for anything
This is the way I've always thought.
I bought this home in 1999.
Prices soared... people knocking on my door offering almost 5 times what I paid.
Now I could sell it for 2 times what I paid.
My point of reference is what I paid for it originally.
But it was never bought as an investment
"Net worth is net worth." So whenever it goes up it's deserved and whenever it goes down it's someone else's fault? It's going to fluctuate for almost all of us.
The 2007 net worth figures aren't real to begin with as they are largely based on (bubble) inflated home values. The decline in net worth from 2007 for all age groups is overstated, based on a windfall thanks to the housing bubble.
It is not a "reasonable expectation" that the 65-74 age group would liquidate their primary residence for retirement. They have to live somewhere? Selling your primary residence for retirement funds is a last resort for most retirees, not "plan A" for anyone with a viable plan.
BTW incomes rose for the 65-74 age group from $40.8 in 2007 to $42.7 in 2010. They also rose for the 75+ age group. Unlike everyone 64 and younger.
And the mean net worth for 75+ age group actually increased from 2007 to 2010, unlike any other age group.
It would appear seniors have fared better than other age groups. But proceed with your self-serving agenda...
I can't respond. I think you have no idea of what it means to print cheap money, give cheap money to a select few, and the effects on a community at large. My advice is that you should play a game of Monopoly where the banker keeps giving your opponent all the money he/she wants and see where you end up. Then we can come back and talk.
I would suspect that many who sell the homestead at that age are doing so to go laterally into a condo (and perhaps using home sale profit to cover condo fees) or using the entire profit to buy into a 55+ community or maybe assisted living. These "entrance" fees are generally the amount of the sale of a decent home. The home cannot be counted as an asset at any rate. In the years when it was, elderly sold very late, just before or at the nursing home stage, or they went to live with relatives.
What many people use to do was to downsize. That is to extract their equity and then live comfortably somewhere else either as rental, with other family, etc. Of course, that is no longer possible for millions of seniors who are under water with their mortgage.
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