January 27, 2013

Inflated Prices, Increasing Rents And Poor Job Prospects

A reader suggested a topic on his circumstance. “Can we have a topic about ME? Gen Y renters unable to buy given the inflated prices, but also facing increasing rents and poor job prospects.”

A reply, “Patience, Grasshopper. When your elders die off you’ll get all the goodies.”

Another added, “In the long run, all the Baby Boomers are dead, and to the survivors go the spoils. Hopefully today’s young people won’t mind future life in a home formerly occupied by debt people. Most amazing aspect of the current U.S. housing situation: They are trying to crank up the home building industry at the onset of a three-decades-long drop in demand due to the retirement and eventual die-off of the Baby Boomers. This can only end badly.”

One had this, “Haven’t we established that Gen Y alone is bigger than the baby boom generation? I’m pretty sure I’ve provided the wikipedia link about twenty times.”

And finally, “Young guy in my office was talking about being outbid on a house earlier this week. I don’t think he is as young as you, but pretty darn young anyway. Seems the winning bid was all cash. I don’t know exactly where they were looking. Maybe we should just rip this article to shreds:

Why rising house prices could be great for American consumers, Posted by Neil Irwin.

“One of the biggest questions for the economy in 2013 is how much a stronger housing market will translate into more consumer spending. It matters a great deal; residential investment is 2.5 percent of overall economic activity right now, while personal consumption is 71 percent. It would be great to see a rise in building activity, but the consumer is where the major macroeconomic action is.”

“It seems at least plausible that this vicious cycle could work in reverse. If homeowners who ended up underwater on their homes accounted for a disproportionate drop in spending, could home price increases that bring their net worth into positive territory have a disproportionate positive effect on spending? Maybe, just maybe, there exist tipping points by which a rise in home prices pushes families from owing more than their home is worth to owing less, and once they cross that tipping point, they will spend more freely.”

Bits Bucket for January 27, 2013

Post off-topic ideas, links, and Craigslist finds here. And check out Chomp, Chomp, Chomp by a regular poster!