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You are largely incorrect that real estate is appreciating at a rate far exceeding inflation. On average, most people can expect to gain a return on their homes of about 1% above inflation after factoring in all costs. Of course, in some areas you will be correct and maybe your friend's area in LA is one of those. But in many places, the value of real estate will not keep up with inflation, after factoring in all costs of home ownership. Location, location, location, as they say...
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Originally Posted by k374
He is married so that is $500k tax exempt... in addition he will roll part of the rest into a cheaper home somewhere else, he is thinking Tampa, Florida where you can get homes by the beach for a fraction of the cost of Los Angeles.
Yes, but my point is that real estate is appreciating at a rate far exceeding inflation whereas the poor souls who do not have real estate but rather have their money in the bank are losing their shirts.
All the experts are saying that this time around there is no collapse as the investment in real estate is based on mature capital.
$1 million is actually conservative, if the value can go from $250k to $680k in 15 years which is a 172% appreciation why can't it go from $680k to $1 million in 10 years which is only a 47% appreciation. Inflation adjusted that is going to be even lower so totally reasonable assumption that it will be $1 million.
The fact is that home ownership is going further and further away from the middle class, in about a decade there will be only 2 ways to acquire a home: passed down from your parents OR you are a wealthy businessman or doctor/lawyer etc. making tons of money. This is already the reality in many other places in the world.
For example, in Barcelona, Spain tiny little homes cost $1 million Euros but the population at large earns a pittance. Even an Engineer in Spain gets nothing compared to what they would earn in the US. Despite this homes in Spain and elsewhere in Europe are astronomically expensive. The same will happen in the US as well.
In a decade I see the median home price in Los Angeles as around $1.2-1.5 million. Infact I believe this is already the case in San Francisco.
Carrying credit card debt does not hurt your credit score
It would be misleading to exclude home value from net worth, unless mortgage debt is also excluded.
There's also a big difference between "ready cash" and "net worth". For people ages 35-50, it is common for half or more of your account balances to be IRAs; net worth but not money you could spend tomorrow (Workers over 50 are more likely to have a pension).
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Originally Posted by stoutboy
In 2010 that figure was $15k. I find that fairly shocking. I knew Americans were in pretty poor shape financially, but I had no idea it was this bad.
The new version of American patriotism is to consume to our fullest potential. Not doing so is harmful to the economy. The government encourages us to go into debt buying stuff (you are penalized under the credit scoring systems if you are debt free).
While widely believed, this is not exactly true -- the credit scoring system does not penalize you for paying off credit cards during the grace period and otherwise not going into debt buying "stuff". Your score is improved by having a history of various types of credit accounts (e.g. secured debt, like a car loan), but with a few exceptions, your FICO score is not hurt by paying everything down to zero.
without taking age and location into consideration this whole topic really is meaningless. a 20 year old with 15k saved is doing well , a 65 year old quite pathetic.
but that same 65 year old with a 75k a year pension and 15k saved is another story.
without taking age and location into consideration this whole topic really is meaningless. a 20 year old with 15k saved is doing well , a 65 year old quite pathetic.
but that same 65 year old with a 75k a year pension and 15k saved is another story.
Thank you! That was the point I tried to make earlier. However, if that 65-year-old has a pension, SS, and a paid off house (like my parents and in-laws), he's not doing to badly.
So then it most likely includes a homes mortgage. I have a slightly negative net worth then, yet I have 60k in equity in my house. My house is worth 235, I owe 170 on it, and I have about 145 in cash and investments. IMO that's not the same thing because I could sell my house and be out of debt. I don't think you count debt on something you can sell unless that something is worth less than you owe on it.
Even if the debt was not secured, you can still, if you choose, sell your house and pay the debt off. For instance, if you owned a $235,000 house outright but had $170,000 in student loan debt, you still have the option of selling the house to pay off the debt, even though the debt isn't secured against the house.
I am not surprised by the low net worth values. I see a lot of older people driving brand new $45k-50k pickups around. Trading in for a new truck every other year is about one of the dumbest things one can do.
Less than 20% of private sector workers have pensions, and they are not doing a good job of accumulating wealth. Many of them will not have paid off their mortages by the time they reach their 60s. Even if they have paid off their homes, they will have to get by for the rest of their years on S.S. and their $15k. That is not a recipe for success.
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Originally Posted by mathjak107
without taking age and location into consideration this whole topic really is meaningless. a 20 year old with 15k saved is doing well , a 65 year old quite pathetic.
but that same 65 year old with a 75k a year pension and 15k saved is another story.
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Originally Posted by randomparent
Thank you! That was the point I tried to make earlier. However, if that 65-year-old has a pension, SS, and a paid off house (like my parents and in-laws), he's not doing to badly.
Stoutboy, what I tried to point out earlier was that many current elderly people DO have pensions, SS, and paid off homes, including my parents, my in-laws, and my grandparents. On paper, they don't look like they have much in assets, especially if their homes are excluded, but they're doing pretty well regardless. To get a handle on what is happening, we really need to exclude the elderly, who are already retired, and the youngest, who haven't had time to accumulate any assets, and focus on those in middle age, most of whom do not have pensions as you noted.
IMO that is different though. having immediate cash in savings is way different than having 15k in a retirement account. For the average household (aged 40-45) that is less than 1k/yr going to a retirement account.
I don't think I could name 1 person I know that doesn't have at least 15k in savings or retirement that is 30 or older. If they are counting teenagers, then maybe I would believe it or even 20 year olds that are paying down student loans and just getting a job, but it just doesn't seem realistic to me.
Hell, my wife worked at Publix from 17-24 making no more than 12 dollars an hour and still walked out of there with over 20k in stock/401k.
I have no idea if the 15K number is accurate. But, I find it very informative that people choose to believe anecdotal "evidence" over multiple studies that have attempted to collect the data empirically. This says more about the way people think, than about net worth in any case.
I actually find that more frightening than the alleged net worth numbers. No offense!
I know a lot of people with million+ net worth, but that is certainly not truly illustrative of the broader populace.
Last edited by shaker281; 07-03-2014 at 12:29 AM..
The new version of American patriotism is to consume to our fullest potential. Not doing so is harmful to the economy. The government encourages us to go into debt buying stuff (you are penalized under the credit scoring systems if you are debt free). Heaven forbid we save and invest our money so that we can be self-sufficient. If we have no savings or investments, we are at the mercy of whatever the government wants to give us and will be more likely to vote to increase the size and scope of the entity that gives us our scraps.
This sounds like unsupported political clap-trap to me.The government did not create, nor does it utilize the "credit scoring system", it is for lenders. Also, I am debt free and have excellent credit. Then there is the fact that the poorest states vote conservative. In fact, Texas is 4th from the bottom, in terms of total net worth, and no one would describe Texas as liberal. Overall, "red" states tend to have much lower net worth than "blue" states. Is your contention that "red" states "are (more) at the mercy of whatever the government wants to give us and will be more likely to vote to increase the size and scope of the entity that gives us our scraps"? Rather counter-intuitive and specious, it would seem.
Last edited by shaker281; 07-03-2014 at 12:29 AM..
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Carrying credit card debt does not hurt your credit score
