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If home equity is most people's biggest asset, they are in trouble....stocks and/or in combination with 401K should be their biggest asset. In addition, stocks are more liquid and have produced a greater return on investment than real estate over the years--or should--for most Americans.
Most I know as in friends from school and the old neighborhood generally find their parents largest asset is their paid for home...
A lot of older people would never be in the market which I have found with my older, much older neighbors...
A paid for home in California with some property tax predictability can provide extreme peace of mind for many...
My parents and grand parents very much fit this scenario... to them the land/home was everything... maybe coming from generations of farmers makes it easier to understand.
For my own situation I wanted to own in the worst way and it has been the best decision for me...
I know a couple that drained their 401Ks because she just had to have a new custom home built in 2007. There was a dispute with neighbors about an access road that had to be built that dragged it out over 2 years and in the meantime, recession. They ended up losing it all as the house was worth about half of what they put into it and they didn't want to lose the one they currently lived in. Just ridiculous decision making.
I have a better one. We have friends who "Stretched" to buy a home in Poway. They might have been OK, except after a few years, they started buying toys on credit -- new cars, a new RV, a boat. They ended up declaring bankruptcy, and walking away from the house (toys were all dispossed).
Less than 5 years later, they got a mortgage on a new house in Temecula. We were incredulous that any bank would lend to them, but, they didn't seem to have too much trouble getting a mortgage.
Then, they started repeating their mistakes -- new cars (a mercedes no less), dune buggies, time share membership, etc. all piled on in credit. They ended up walking away from the Temecula house too.
Now, they're in their 60s, with no retirement savings, scraping by on social security, living in a 1 bedroom rental in the sticks in Oregon, still hoping for the So. Calif. dream they feel they were cheated out of....
Plenty of ridiculous decision making to go around in the world. But then, in all fairness, I've probably made a few ridiculous decisions in my life too.
Location: Miami (prev. NY, Atlanta, SF, OC and San Diego)
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Owning a home and stocks are not mutually exclusive...now, if your marital/family situation dictates you need a larger / more expensive home than you initially wanted, then expect to save less--but it is foolish to pile one's entire savings into one asset class. Diversification always wins out. Even with a paid off home, I am hoping one has other assets--social security payments alone wouldnt cut it for me. I do not know you and am not saying you do this but I have met plenty of people who put all their money into housing at the expense of other assets. Not the wisest decision.
with the "younger generation" having difficulty finding high paying jobs (less and less), wanting more affordable status symbols (German cars, expensive vacations, etc) now,
and the shared society mentality, wonder what the real estate picture will look like in 15-20 years. I question if high home values can be sustained with a younger generation earning less than their parents.
Quote:
Originally Posted by Ultrarunner
Most I know as in friends from school and the old neighborhood generally find their parents largest asset is their paid for home...
A lot of older people would never be in the market which I have found with my older, much older neighbors...
A paid for home in California with some property tax predictability can provide extreme peace of mind for many...
My parents and grand parents very much fit this scenario... to them the land/home was everything... maybe coming from generations of farmers makes it easier to understand.
For my own situation I wanted to own in the worst way and it has been the best decision for me...
Most I know as in friends from school and the old neighborhood generally find their parents largest asset is their paid for home...
A lot of older people would never be in the market which I have found with my older, much older neighbors...
A paid for home in California with some property tax predictability can provide extreme peace of mind for many...
My parents and grand parents very much fit this scenario... to them the land/home was everything... maybe coming from generations of farmers makes it easier to understand.
For my own situation I wanted to own in the worst way and it has been the best decision for me...
Definitely this for past generations. There's the old saying that farmers live poor and die rich -- presumably due to the land. Farm land is a bit different than the types of primary residence homes we talk about here -- among other things farms usually produce cash flow. But I see the connection.
And those who weren't farmers started their careers in a time when one worked a whole career at a single company who provided a stable, guaranteed "salary" and benefits from retirement until death. Of course, these defined-benefit pensions usually were invested in the market (and so, by indirect proxy were the beneficiaries) but the beneficiaries may not have realized this and certainly they didn't have to know or do anything about the market. That was all taken care of for them.
Owning a home and stocks are not mutually exclusive...now, if your marital/family situation dictates you need a larger / more expensive home than you initially wanted, then expect to save less--but it is foolish to pile one's entire savings into one asset class. Diversification always wins out. Even with a paid off home, I am hoping one has other assets--social security payments alone wouldnt cut it for me. I do not know you and am not saying you do this but I have met plenty of people who put all their money into housing at the expense of other assets. Not the wisest decision.
with the "younger generation" having difficulty finding high paying jobs (less and less), wanting more affordable status symbols (German cars, expensive vacations, etc) now,
and the shared society mentality, wonder what the real estate picture will look like in 15-20 years. I question if high home values can be sustained with a younger generation earning less than their parents.
Investors buying rental houses and foreign buyers will keep it moving, but I do expect a lessening of increase in pricing, which seems to be the case now. Last report showed about a 1.6% rise expected in SD County.
Owning a home and stocks are not mutually exclusive...now, if your marital/family situation dictates you need a larger / more expensive home than you initially wanted, then expect to save less--but it is foolish to pile one's entire savings into one asset class. Diversification always wins out. Even with a paid off home, I am hoping one has other assets--social security payments alone wouldnt cut it for me. I do not know you and am not saying you do this but I have met plenty of people who put all their money into housing at the expense of other assets. Not the wisest decision.
with the "younger generation" having difficulty finding high paying jobs (less and less), wanting more affordable status symbols (German cars, expensive vacations, etc) now,
and the shared society mentality, wonder what the real estate picture will look like in 15-20 years. I question if high home values can be sustained with a younger generation earning less than their parents.
Agreed 100% that diversification is the key. That is why I cringe when I hear people on here talking about putting all their wealth eggs in one basket (primary residence). That isn't the worst possible path, but it's also nowhere near the best.
Ultrarunner mentioned he desperately wanted to own a home -- that was very common in older generations but seems to be quickly diminishing in successive generations. Interestingly, I see a similar shift in driving/car ownership, although not as widespread. I think these represent a large structural shift in society and it will be interesting to see how it plays out. Of course, it's possible one or both of these trends are simply self-defense mechanisms -- i.e., I can't afford it so I don't want it.
I believe the younger generation may be earning less as a whole or on average, but crucially I see a finer distinction which is a trend toward "winner take more". That is, the curve is steepening and the top say 5% are increasingly getting a bigger share of the pie while especially the say bottom 25% are getting less of it. You can see this discontent in plenty of threads about home prices in San Diego.
Investors buying rental houses and foreign buyers will keep it moving, but I do expect a lessening of increase in pricing, which seems to be the case now. Last report showed about a 1.6% rise expected in SD County.
I'm heavily into rental property...
Right after college I bought my first home and spent a year redoing it from bottom to top... started with the foundation... then I found another fixer in a little better neighborhood kept the first home as rental and repeated every 12-18 months... did this for 10 years and accepted a corp offer too good to refuse.
Looking back simply staying the course would have proved far more lucrative... but I still have my management company so it's worked.
Over time I have exchanged out of most of my residential and into commercial... which I really enjoy as the commercial is NNN leasing... doubt I will ever invest in anything with beds again as business to business is much more straight forward.
Just and example... for the first time ever I'm dealing with bedbugs at a single family rental... the family has been there for 7 years... bed bugs showed up when the Grandmother took in her grandsons... bugs came with them... now it is my problem...
The old retirement plan real estate wise was to have 5 units paid off...
Agreed 100% that diversification is the key. That is why I cringe when I hear people on here talking about putting all their wealth eggs in one basket (primary residence). That isn't the worst possible path, but it's also nowhere near the best.
Ultrarunner mentioned he desperately wanted to own a home -- that was very common in older generations but seems to be quickly diminishing in successive generations. Interestingly, I see a similar shift in driving/car ownership, although not as widespread. I think these represent a large structural shift in society and it will be interesting to see how it plays out. Of course, it's possible one or both of these trends are simply self-defense mechanisms -- i.e., I can't afford it so I don't want it.
I believe the younger generation may be earning less as a whole or on average, but crucially I see a finer distinction which is a trend toward "winner take more". That is, the curve is steepening and the top say 5% are increasingly getting a bigger share of the pie while especially the say bottom 25% are getting less of it. You can see this discontent in plenty of threads about home prices in San Diego.
The car analogy also fits... bought my first car at age 12 with money I had earned... it was a basket case 1929 Model A Ford... spent the next couple of years restoring every nut and bolt... I own 50 vehicles today with the oldest being a 1905 Oldsmobile...
Real Estate and Automobiles... guilty as charged.
A lot of kids going off to college don't own cars and are not even allowed to bring cars... definite shift from the way it was...
Those with cars around her generally have a new Civic or similar that parents bought... can't have their kid driving around in something old lacking in safety features and a warranty.
The car analogy also fits... bought my first car at age 12 with money I had earned... it was a basket case 1929 Model A Ford... spent the next couple of years restoring every nut and bolt... I own 50 vehicles today with the oldest being a 1905 Oldsmobile...
Real Estate and Automobiles... guilty as charged.
A lot of kids going off to college don't own cars and are not even allowed to bring cars... definite shift from the way it was...
Those with cars around her generally have a new Civic or similar that parents bought... can't have their kid driving around in something old lacking in safety features and a warranty.
Ha -- I wasn't targeting or even thinking of you with the cars statement but it's funny that it applies!
There seems to be a multi-decade trend away from the tangible (e.g., cars, homes) toward the intangible (experience, information, knowledge). Those trends may reflect globalization and the move from an industrial economy to a knowledge economy.
I've definitely seen it in managing units rented to Millennials...
Also noted an increase in those wanting to try their hand at gardening...
Many will not have cars but instead bike or have transit passes.
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