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First of all, he hasn't looked at this on a metro by metro basis. It is completely meaningless if it doesn't look metro by metro since housing is inherently local. Is he talking about boomers in small midwestern or rust belt towns where the population is falling - yeah they're going to have trouble selling. Or is he talking about boomers who own well maintained homes in good school districts in growing metro areas - not so much of a problem.
Second, no mention of population growth or other demographic trends such as people moving from north to south which will work to increase demand for housing in many areas.
Third, he ignores basic supply and demand (see below)
Quote:
Originally Posted by shaker281
At present housing seems to have stabilized and, short term, there is even a shortage of inventory in some markets. But, what happens when the boomers finally start selling their homes?
"Between 2010 and 2030, the numbers of people in what would be their peak buying years will be growing, but they're still going to be a quarter of what (their numbers were) in the previous 20 years.Another major factor is that the segment of the population that would historically have bought those homes just won't be able to afford them — the decline in educational funding means that this group won't have the education to get the higher-paying jobs."
What is he smoking? More people are graduating from college and graduate school than ever before.
Quote:
Originally Posted by shaker281
"Toward the end of this decade, I see 1.5 to 2 million homes from seniors coming on the market, and between 2020 and 2030, there will be a national net surplus of 4 million homes that they cannot sell. And that's a conservative figure."
Supply vs. demand. If they can't sell the houses the prices will come down to where someone is willing to buy them. The population is still growing and people need to live somewhere.
Quote:
Originally Posted by shaker281
Many current households with children will want to move up to these houses, but demographics and preferences have changed — about a quarter of those who would be considered in their prime buying years now want something else, like condos or town houses. And that's a significant change, because that kind of preference (from that buying group) used to be nonexistent."
Do the younger households with children WANT condos or town houses or are the settling for them because they haven't been able to afford a single family house that works for them?
If millions of seniors go to sell their single family houses, prices will drop and these will become affordable to people who otherwise could have only afforded a condo or townhouse.
Quote:
Originally Posted by shaker281
"Q: Don't you think the boomers themselves will be buying, in some form?
A: That's the surprising thing. They're going to rent. Seniors, when they reach 65, are homeowners — 80 percent of them own their homes, which is the highest homeownership rate of any age group. But currently, about 4 percent of senior homeowners move each year, and about 60 percent of them move into rentals of one kind or another. That number shocked me. I re-ran the numbers, and I had one of my crack doctoral students re-run the numbers. We went back through (the federal) American Housing Survey, and repeatedly, back to 2001, it was all the same — there's very little variation in senior buying/renting behavior.
I think you'll see a surge in construction of apartments for more affluent renters. Two-thirds of all new housing demand between 2010 and 2030 will be for rental housing."
If there is that much demand for rental housing it will drive up rents - as has been happening on a smaller scale in many places over the last few years - to a point where buying becomes cheaper then renting. And then people realize this more of them buy.
"Demand" however, implies "ability to buy." Where are all the barely-employed people in their 20s going to get enough money to buy houses? They've got the worst employment stats in the country, and it's not by small margins. Unless job growth radically improves, when the music stops, I don't see a "slump" in home values -- I see a loud and jarring crash.
Eventually those under-employed 20 somethings will get better jobs and/or move up as the economy improves. If nothing else, if the boomers are selling their houses in a few years, presumably that means they are retiring as well, which will open up positions for others to move up the ladder behind them.
Once those younger folks get better jobs, one of the first things they will want to do is move out of their parent's house or ditch their annoying roommate. All of a sudden you have a lot more demand for housing.
I'm not saying it's going to be all puppies and sunshine. But I do think articles like this are meant to take an extreme position to stimulate thought and debate, not necessarily to present a balanced view of the most likely scenario.
I'm retired. I rent. I was the first tenant in my apartment, that is, I had to wait until the complex was built to move in. The city manager (I technically live in a city - population 29,000) told a class of mine that they were expecting a lot of workers from the national lab, other government complex and government contractors to be the ones to gobble up the apartments. Instead, the first wave of renters was the older people in the town who sold their houses and moved into ground floor apartments.
Eventually those under-employed 20 somethings will get better jobs and/or move up as the economy improves. If nothing else, if the boomers are selling their houses in a few years, presumably that means they are retiring as well, which will open up positions for others to move up the ladder behind them.
Once those younger folks get better jobs, one of the first things they will want to do is move out of their parent's house or ditch their annoying roommate. All of a sudden you have a lot more demand for housing.
I'm not saying it's going to be all puppies and sunshine. But I do think articles like this are meant to take an extreme position to stimulate thought and debate, not necessarily to present a balanced view of the most likely scenario.
why don't seniors hold onto their homes just a few more years, then their adult kids can inherit and that way stop renting even though they can't afford to buy?
i think home ownership is becoming intergenerational; kids will grow up to own homes if their parents owned homes, and will grow up to rent if their parents did not own homes.
Quote:
Originally Posted by Escort Rider
Interesting article - thanks for providing the link. If the prediction comes true, it may be a case of the "boomers getting what they deserve" as per another thread in the Economics Forum with that basic title. And just when we thought the housing market was becoming somewhat stable.
Quote:
Originally Posted by HomeIsWhere...
I appreciate your proceeds to shoebox thinking GW! The younger generation have boomer parents and from what I hear they are all loaded and financially able to help their children with down payments. The rest of them are good and kind parents as well and I am sure they will do their best to leave each of their children something, maybe not a fortune but something nonetheless.
Yes, I believe that many retirees will definitely turn their homes over to their children in the hopes that will help to alleviate some of the economic impact which the country has seen and currently finds itself in, in spite of the good news of the increase in home sales (at almost pre 2007 prices, no less.)
CityGuy9975 maybe you can explain this to me, as my understanding both from the media over these many, many years and many, many posters here at the c-d forums, the boomers are the chosen ones, born with silver spoons in their mouths and have hijacked and plundered this country to its current economic, environmental, and woeful and pathetic state...which is in serious dire straits, as we all know. So how is it that there are boomers who may not be in the best fiscal shape in their retirement years...has it been their greed, their stupidity, or is it just that there may be boomers who never succeeded in such epic proportions like some of their brethren?
Seriously, I just do not "get" the disparity!
Best regards, sincerely
HomeIsWhere...
Well...unfortunately, as pointed out by Escort Rider... it may be a case of the "boomers getting what they deserve" as per another thread in the Economics Forum with that basic title.
I can't believe what I'm reading^^^^^. Inheriting the money, the house. Sure boomer parents
will leave their assets but some of these posts sure sound greedy and heartless.
The boomers I know, worked hard, saved their money, didn't go into debt (other than taking a mortgage
on a home) and were not born with a silver spoon in their mouth. Many lost their jobs either through
downsizing, companies who relocated or went out of business and some because they were too
expensive so they were laid off. Note: if you think 45,000 after 25-30 years of work is big bucks
I don't know what planet you live on. One colleague was let go and he was only 45 because they
could replace him with 22 year old and pay that 22 year old $10.00 an hour. So who is to blame here?
Quote:
Originally Posted by flyingcat2k
You are making an assumption that there are jobs where the parents are. In some locations, like UP Michigan or Upstate NY, there are few jobs to be had for young people. In some locations in New England, elementary schools have to lay off teachers and close buildings because enrollment plummeted in the past 10 years but the high schools still have their students as people move with older children or ship their students out of the city districts.
If you live in a rural part of the Midwest or South, most of the kids have moved to the cities where jobs are more easily found. The severe dropoff in 0-5 year old populations in some areas of the country is as high as 25%. I wish I could find the WSJ article from last year that talked about it.
I am the only one in my family that left my home state for a job. I make a lot more money than I ever could "back home" in a lower cost of living area and won't be moving back until I retire, if ever. I even turn down positions there as they still pay far less than what I make currently for the same line of work. In no way will I sacrifice to live in the family home to make a paupers wage and lose it in a tax lien sale or sell it when the upkeep is more than I can afford.
Right, many children of boomers had to move to other areas and states for jobs.
Quote:
Originally Posted by City Guy997S
Boomers made tons of money and spent more! There have been lots of places for them to cash in along the way (home equity loans, exotic vacations, leased cars, self guided 401ks,). Previous generations didn't lease a new 50k SUV every 3 years, their pensions were defined programs and most of them got a fixed rate loan then "PAID THE HOUSE OFF!"
Add a divorce (costlier than ever), high costs of raising kids/colleges, expensive lifestyle choices (McMansions, country club living) and despite the monster incomes (compared to previous generations) the money is gone!
I recently spoke with a business acquaintance about retirement. 51 yr old, father of 3 kids that will soon need college, INTEREST ONLY home loan on a house with ZERO equity, flat income (no big money in the pipeline) and he just opened his first IRA last month! In my opinion, that guy is screwed both now and in 15-20 years! But he has new cars, a nice house and appears successful........
Then you must be talking about the upper middle class.
I knew and know many people in their 30's and
40's who spent money on exotic & frequent vacations, cars and yes their mcmansions too (and they
still have student loans). Their remarks are : screw the kids inheritance, I deserve this.
It has nothing to do with hope... just like in the past, as the economy improves more people will be able to afford a place of their own.
Unless you believe the economy never will get better and today's struggling young people will still be living at home and working at Starbucks 20 years from now. In that case, extreme pessimism isn't a plan either.
The article is only showing a worse-case scenario, not what is realistic or most likely.
I just read a great article concerning housing and retirement. The "paid off house" is the key to a successful retirement since you should spend 20-30% of your income on housing and in retirement you need about 70% of your former income to retire at the same level lifestyle. So with no mortgage, your retirement would be pretty simple (as long as you have funded retirement plans). Of course if you pay it off early and then add 20-30% to your retirement for an extra 10-15-20 years then you really should be set!
The volume isn't a dent in the market. First, it isn't like one day they all wake up and sell at the same time. Next, a lot of them move from where they lived when working to where they live in retirement. Different markets.
And then lets not forget something else, the one thing almost everyone who brings this up forgets, through convenience or lack of thinking about it. The population is growing and boomers are becoming a smaller segment of the population. Say a boomer couple sells. That is one house for two people. Where did the family go? Did they disappear from the planet? Nope, they are aging into the population that wants or needs a home.
Then lets take the available land for building. There is a finite amount and in desirable places, people buy homes just to raze them and rebuild. As time goes on, this will happen more and more. Finding older home in some places is almost impossible. New buyers just want the land, especially if it can sustain a larger home. While the size of the average home might be getting smaller in some places, that isn't the case everywhere and in the places where it is common to demo and rebuild, the population densities are also high.
These static numbers used to make up an issue are kind of funny though.
It has nothing to do with hope... just like in the past, as the economy improves more people will be able to afford a place of their own.
Unless you believe the economy never will get better and today's struggling young people will still be living at home and working at Starbucks 20 years from now. In that case, extreme pessimism isn't a plan either.
The article is only showing a worse-case scenario, not what is realistic or most likely.
It's not a matter of them working at Starbucks forever, it's a matter of them, as an aggregate, making a whole lot less than the boomers inflation-adjusted as they age. That means the collective purchasing power decreases which means the holders of the asset take a bath when it's time to liquidate. If the sucker after you makes less than you did, you're the sucker at sale time. Do you actually believe the generations after the boomers are actually going to have a higher purchasing power than the boomers? LOL
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