Wealthiest Americans ‘Net Sellers Of Homes’
Danielle DiMartino writes at the Dallas News. “The Federal Reserve’s survey of consumer finances for 2001-04 illustrates how vulnerable we are to a cooling housing market. As Merrill Lynch aptly put it, ‘The Fed survey shows that this tide did not lift all boats.’” “As for paychecks, median income across all strata rose by a measly 1.6 percent after inflation, a sharp slowdown from about 10 percent in the prior period surveyed, 1998 to 2001. Not surprisingly, debt played an integral role in the deep slide.”
“After falling for years, mortgage and other debt as a percentage of total family assets rose to 15 percent in 2004 from 12 percent. Moreover, fewer saved in the latest period. The Fed survey found 56 percent squirreling away acorns for a rainy day, down from 59 percent three years ago.”
“Wednesday’s report on the savings rate showed that it remains in negative territory, where it’s been for seven of the last eight months.”
“Moody’s Investors Service reported Tuesday that for the first time in three years, auto loan delinquencies have started to rise. More telling is that serious delinquencies in the home equity sector are up 32 percent over the last year.”
“Maybe squeezing into that home with a piggyback loan and buying a second SUV despite being upside down on the trade-in were not good ideas after all. Such poor judgment calls are common among 35- to 44-year-olds, who experienced the greatest decline in net worth.”
“Those between 55 and 64 saw the most dramatic increase in net worth. We’re talking about the people who were already in a home when the boom began and have counted their winnings in the form of fat capital gains. Which brings us to a recent Census Bureau study. In the last four years, the age group that’s experienced the most pronounced decline in homeownership rates was those between the ages of, you guessed it, 55 and 64.”
“Could it be that the notion that retirees will keep their homes is fundamentally flawed? (If so, it renders fatally flawed the theory that baby boomers will retain two residences in retirement.) In sum, the wealthiest of Americans are net sellers of homes and have the most wiggle room on their balance sheets.”
“The most-stretched households have the least in the way of give. And those who are selling at the peak and pushing prices downward may be forcing the hands of many who are in no position to give up the roof over their heads.”
Strong hands generally leave weak hands holding the bag — it is a time-tested principle of capitalism.
Exactly right.
http://tinyurl.com/m7fs8
Strong hands are mostly already out or nearly there. Some of them even got out early and called the top prematurely.
“Could it be that the notion that retirees will keep their homes is fundamentally flawed?”
What would you rather keep — your home or your shirt?
‘Could it be that the notion that retirees will keep their homes is fundamentally flawed? If so, it renders fatally flawed the theory that baby boomers will retain two residences in retirement.’
The only reason second home percentages are so high is because of the boom. This is another shelf of the hidden inventory.
Wow. This is huge. I’ve been thinking that these boomers all have lots of equity, when in fact, they’ve been selling their big homes. Very telling.
Their equity is of the best possible type — in the form of tax-free realized capital gains!
With age there is great wisdom.
Tax free in the amount of (Are you sitting down)
$500K………..
Nice retirement paycheck!
Yummy!
But any negative (even one dollar) cannot be written off. The tax benefit is only good if you make money. If you lose money, you are toast. My understanding is (I’d love to hear a tax CPA correct me on this):
If you make 550k profit and then loose 600K, you can’t wash the 600K against the 550k (or even 50K). You still owe taxes on the 50K and then you have to eat completely the loss of 600K.
[at least with a dotbomb stock, you could of written off up to 3k per year against your income....]
I am not a CPA but my understanding is you can’t write off a loss on a personal residence. If it’s and investment property you can write it off against income or investment gains or carry the loss forward until you can.
mine was only 250k but im single now so it will do.
tax free only for the capital gains potions at 15% of 500k max. 75k. not bad.
If you think about it, the hand-writing has been on the wall regarding the social security situation. None of the boomers (me included) are not sure of what will be available to us when retirement time is here. I suspect that the ones who sold saw it as a way to out-smart that whole deal and gathered up all the acorns they could find for the upcoming rainy day (retirement). The most acorns was in selling their current property.
And personally, I think it’s better to have a smaller home…at least a one level residence….as I get older… because it will become more difficult to get around as the years go by. Stairs will NOT be my friend, I’m sure. A smaller place (owned or rented) is by far a much better choice….also, less to clean and heat.
Maybe I should change my screen name to PraticalPolly, or something like that. LOL!
BayQT~
Yes but you won’t be able to prance around in your 400 square foot closet with mirrored walls and tell yourself that you’re the master of the universel. LOL
Those 500K+ SD condos with the cute models come to mind w/one kitchen cabinet and murphy beds, LOL.
Ok, ok…I get your points….sometimes small *can* be TOO small. But smaller can also be better. Let’s revisit this (humor me here…I know we won’t) when you’re 70 or so. I’ll have you over for tea at my *SMALL* apartment/condo. I’ll make sure it’s wheelchair accessible.
I crack myself up! LOL!
BayQT~
I agree, smaller is usually better, just not too extreme. But if you’re in SF, small is usually the norm. I know, I sold out of there last year. Are you planning to stay in the City?
You have raised a very valid point, which I’ve been thinking about for a few years now. (I’m 50, but I have a bad knee {and I’m fat, let’s be honest here :)}, so I prefer not to go down stairs.)
I think there is a large underserviced market for good apartments/condos/townhomes. I don’t mean granite countertops and fancy appliances, but things like;
reasonable-sized rooms,
plenty of storage space (both in the unit and in the car space),
solid construction, and above all
quality soundproofing.
I remember reading an article that said that in both New York and London, upmarket units built before 1920 were still fiercely desirable simply because of the quality of construction.
Those old 20s lathe and plaster walls allow a lot of sound thru. Gotta keep quiet with your sweetie at night if there’s company next door.
This is another reason why McMansions will become the future’s pink elephants. If people expected Boomers to bail out the housing market, why in the world have they been building huge, two-story monstrosities? We have a family of five and still wouldn’t want one of these. This might actually prop up the older SFH market as many/most in So Cal are single story (not to mention trees, larger lots and NO HOAs!).
Yet another way the older boomers and their predecessors are sticking it to those under 50, again. Note that according to this survey income fell for those under 45, rose for those over. Wage and self employment income fell, retirement income rose. And 20 years from now those now under 45 aren’t going to have any retirement income.
Be wary. As those older boomers empty the nests and start selling their homes, it may not be condos that tank the most. Condos tanked the most last time, after they had sold them to us and bought homes to raise children in!
Good Point on the Condo Thing. I sold a condo to a couple of baby boomers in Nov. 2002 (I thought it was the high…lol). They sold a large brownstone on Capitol Hill that they had lived in for about 9 years and bought a house in Colorado Springs and a 1 bedroom condo in DC. They paid CASH for both.
Oh woe is me. Give me a break. After years of hard work these folks are thinking of retirement and liquidating their assets. How is that “sticking it to those under 50″? No one is forcing anyone to buy. And what is wrong with selling your house anyway?
Nothing wrong with it — I would say that would be downright smart, in fact!
Is it really the older boomers who are selling? My mother, age 70, sold her house last year. Too much work and upkeep. Not to mention re taxes in upstate NY of 16k per year. She bought a townhouse close to me and my sister for cash and had alot left over.
She already has a free and clear place in florida where she winters.
ten year getting crushed today …
yields +79 ticks to 4.668
4.82 is 52 week high … mortgage rates mirror the 10 ten year yields.
The 55-64 year olds ‘know’ that houses don’t go up 6-figures a year. They are a bit ‘older and wiser’ than the ‘now’ generations behind them. They know how hard it is to EARN money…and not through .com stocks or condos.
They know that ‘easy money’ doesn’t exist over the long term.
SoCalMtgGuy
Another F—-D Borrower
FB FORUMS
Unlike gen-x’ers, that generation has seen many a boom and bust cycle. Profits are normally hard to come by. They know when the getting is good and are acting upon it. Very smart, IMO.
Classic case of wealth transfer. The wealthy are able to accumulate assets during leaner times because they aren’t as reliant on credit. They have cash. Then they distribute these assets in good times to those who are able to tap credit markets (in the case of RE) or margin debt (in the case of stocks.)
Net/net, the rich get richer and the poor go more into debt. But of course, you knew that already.
Something you don’t hear about much is inheriting property that is completely paid for. My brother & I will inherit paid for properties in Oakland, Santa Barbara, Tahoe & Half Moon Bay. They have all been in the family forever. I have friends whose parents have tried the whole flipping thing and really don’t own a cent of their homes, and what is there to leave to your children / grandchildren? I guess passing on property is not going to be the way it was 15-20 years ago… Just a thought
I’ve seen alot of this in Florida. In one complex of 33 units, fully one-third of current owners inhertited. I hope to leave my unit to my son - unless, of course, a hurricane knocks it down.
Here we go. Boomers are sticking it to Gen-Xers!
Uhhh… CORRECTION!
Gen-Xers are doing a wonderful job of sticking it to themselves and each other. The boomers are just handing them the ropes to hang themselves and watching in disbelief as the dolts go ahead and do it…
Exactly. When I was 30, I sure as hell didn’t have a BMW and a 400K house. Hell, these kids have that stuff at 25.
Couldn’t agree more.
Think what *their* kids will be expecting at 25….
A shiny new moped, with extra gasoline rations?
good one!
Exactly. Well said.
It’s almost comical. Typical conclusions reached when using the entitlement mentailty. “It’s all their fault. They made me do it.” LOL!!
You are right…no one has forced anyone into the herd mentality of “buy now or you’ll be priced out forever”. Each generation has it’s own cyclic period of being stupid. Not sure what the generation was called before the boomers, but they probably cashed out during the last housing bubble. Maybe the current buyers (speculators) are just more greedy and that’s why this bubble is more pronounced. I’m at the tail end of the boomers (46 years old) and I have been in disbelief as my house went through the roof (I cashed out).
Just for reference. The generation before the boomers were “The Greatest Generation”
I would say the Gen-Xers have stuck it to themselves.
I would say the Gen-Xers ought to do more bloggin’ and less flippin’.
More saving, more working, less spending and less flipping.
IMHO, if one reads Ben’s blog for a year, they’d be more financially savy than 90% of the population.
Some of us Gen-Xers are watching this thing and thinking we might be handed a once-in-a-lifetime buying opportunity in approximately 3-10 years. Thank god I lost my life savings of 15K during the dotcom bust! Best education money could buy.
Please, let’s take the Boomer/Xer deathmatch back over to patrick.net.
There are lots of irresponsible boomer and lots of irresponsible Gen-Xers. There is plenty of blame to go around.
This easy “risk free” liquidity just exploited the weekness in both generations.
Boomers selling their larger houses and moving into smaller houses, condos and/or rentals is exactly what should be happening. As you become older and get closer to retirement you should start to lower you consumption.
“Moody’s Investors Service reported Tuesday that for the first time in three years, auto loan delinquencies have started to rise. More telling is that serious delinquencies in the home equity sector are up 32 percent over the last year.”
REOs– The new paradigm.
REOs– The new paradigm… ONCE AGAIN!
About time. This could have unraveled 2 or 3 years ago with much less fallout. Now the crash for all these $1M+ dumps will not amopunt to just a correction — IT’LL BE A HISTORIC PLUNGE OF EPIC PROPORTIONS!!!!
The Mother of All Corrections
Yet in my neighborhood with all the 35-45 yr olds they’re in denial. There are too many new H3s running the streets. Oh well the avalanche is starting the slide. They’ve been warned by the old guy driving his golf cart.
That smarty old guy has wads of cash under his GC seat too.
Maybe I’ll pick up a good deal on a repo H3 next year?
A correction is nothing but foreplay to a bust.
Remember the stock market correction?
I would like to throw in a quote from David Lereah at this point: (From a press release on March 1, 2005)
“Because the typical second-home buyer is a baby boomer, it’s likely over the next decade that second-home sales will remain historically high,” Lereah said. “The boomers are still in their peak earning years and have both the wherewithal and the desire to purchase vacation homes and investment properties.”
LOL
Eric in DC
What makes Liareah so sure that wealthy baby boomers are this stupid?
“Because the boomers typically buy most the scratch off and lottery tickets…. uh… we expect this new and powerful… uh… demographic trend to… uh… fuel an unprecidented amount of second AND third homes….since… uh… the boomers are at their peak Lotto winning years… yeah, that’s the ticket… Lotto winnings! Scracth off… buy UP!”
I don’t get the whole investment property aspect of his comment. When I get old and retire I want to cash out and enjoy whatever wealth I have. I won’t have a goal to keep buying properties until I die…it doesn’t make sense. MOST retirees will sell their principal residence and downsize, which will create a bigger glut of nice family homes which should start driving the price down as inventory continues to build and make things afforadable again for the next generation.
All these Boomers …fast foward about 10-20 years. What happens when all of them start to die? Guess there will be LOADs of excess properties.
i am not sure if there will be a glut at all, because the number from the generations following are more than the boomers, and it will be a gradual process over many, many years.
Please notice that this comment is 1 year old! It is from 3/1/2005.
it seems like in most of the flipper/trump wannabe articles that most of them appear to be in their 30s and 40s who’ve overleveraged. the 20ish people seem to be getting in too. I’m not sure how many in their 50s and 60s take on risky behavior like interest-only and BMWs bought with refi money. aren’t their risk taking years behind them?
“aren’t their risk taking years behind them?”
Not if they haven’t saved nearly enough for retirement.
As one on the wrong side of 50 myself, I think someone upthread already said it: you’ve seen booms & busts before (& probably lost money in one or more) and you’ve gotten a lot warier. And the cliches about “not making any more land” and “gotta get in while you still can” and “real estate only goes up” were as prevalent 25 years ago as they are now. Been there, done that, got the T-shirt…
Spoken as one who’s lost money on selling a primary residence. Twice.
The bubble reached its peak once the “bidding wars” ended. That was 6+ months ago. It’s been deflating even since. The deflation will be far more dramatic and time-compressed than the inflation period.
The bidding wars, used extensively to extract the last bit of froth out of the market by the RealEstate sales complex, was the ultimate sign to those with any sense to get the hell out.
Gonna be hell paid once all the counting is done…
I had no doubt it was a bubble when I read that people in Virgina were sleeping outside to get into a new developemnt.
I agree that the bust will be at least as dramatic as the boom, with at least as much money being lost on the way down as gained on the way up. I disagree that it will be more time compressed however. As we all know, sellers are reluctant to lower their prices. The difference between the asking prices and the true market values causes a lack of sales. This excess supply will inevitably lead to price declines, but slowly and reluctantly.
I think we’re in for at least five years of slow sales and slowly reduced prices (think Japan). The upside of the slower sales is that more real estate agents are out of work
Slight disagreement - I certainly think the event as a whole will be protracted but most of these axioms being applied only apply to primary residence holders. If you’re holding 8 investment properties, all neg cash flow, its not going to be your choice to sell those properties. I think you’re going to have in the first two years a fast spurt and then a slow trickle until balance is achieved as those without choices (Int Only/NegAm/Arm resets and foreclosures) are herded to the exits.
$6 trillion ($6,000,000,000,000) will disappear because the would-be buyers have stopped believing. The word people are afrain of; deflation. Those of us who cashed out are double/double winners turning funny real estate valuations into cash and now the cash will be worth more.
N.B. A “flipper” is someone who buyas AND sells a property. The last flipper stuck with the buy who cannot sell is called a flopper. You heard it here first.
Good one, Robert!
Better yet, a F’cked Flipper.
The inflation-deflation debate still isn’t over. From where I sit, I see inflation being quietly fueled by the FED. It’s in partly their interest to try and inflate away the deficit and underreport so the SS payout stays low. It also eats away at high asset prices. Cash will still rule short term (2yrs) as liquidity presents options…
Being a saver, I, too, wouldn’t mind a bit of deflation, but I have a hard time seeing it come to pass, what with rising energy costs and a Fed that’s shown it’s not afraid to virtually give away money to avoid “hard times.”
Unless the FED fires up the printing press and buys $12T in MBSs.
they don’t even need to buy all 12t. 25% should have a big big impact already.
(Yet in my neighborhood with all the 35-45 yr olds they’re in denial. There are too many new H3s running the streets.)
Those under 45 believe they can pay higher payroll taxes on lower incomes and spend more money. It doesn’t work. Didn’t some of us grow up in the 1970s? Those of us at the back end of the baby boom should know better; the rest should have been warned by their parents.
The Gen’s have never learned the principal of “Delayed Gratification”…..
You are guilty of the same generalizations. Some of us drive Hondas for a decade and have quite a warchest saved up. By the way, I live in a fully paid up condo with my wife and son. The condo was purchased in 1993. We don’t live a life of extravagance, fund each of our 401k’s to the $15,000 limit, fund each of our IRA’s to $4,000 limit, put a good chunk of change away in 529 plans for our son and then bank approximately 55% of our monthly take-home pay. Delayed enough for you?
Look who is Generalizing….
If you think you are a classic example of your generation you are in La La land…
Agreed.
The Guru,
No offense intended, but the Gen-Xers were barely graduating highschool in 1993 and the mid-90’s downswing was still in full-force. You are either a very early Gen-X’er and therefore don’t really capture the essence of stupidity from my generation, or you were raised by hermit gnomes.
Born in ‘72 in the Midwest. When the spousal unit and I hit the workforce in the mid ’90s with an insane amount of student loans each, it seemed like you had two choices- try to hang on in flyover country where the living was cheap and the jobs were non-existant, or go to one of the coasts where there were actual jobs to be had along with an insane cost of living. Even then, we nixed the idea of heading toward California because of the high COL and housing prices compared to flyover country. I’ve got an old school pension, he’s got a pretty good defined contribution plan. 15 year note on our house that we paid less than $150K for- it’ll be paid off by my 45th birthday. Two newer cars we financed- previous vehicles hit their DNR points within a year of each other with over 130K miles on each of them. I’m not happy about the car payments, but we plan to get at least 200K miles out of the vehicles (okay, the VW may not make it but the Corolla will probably be my theoretical offspring’s first car) and I feel like the math for that will work in the long run. One set of student loans got paid off early. We’re still working on the other set. A credit card balance of about $1500, but as long as the interest rate is stuck on ‘teaser’ (1.9% right now) it’s not worth pulling money out of savings to pay it off. If/when it goes past 3.9%, it will be paid off in full that same month.
Growing up in the Rust Belt in the 70s and 80s wasn’t the Great Depression, but it had more than its share of suckiness. I remember what happened with some of my friends’ parents during that time. I don’t want the same to happen to us.
I think we’re pretty average overall.
37 years old.
TheGuru,
Don’t even try…certain people on this blog are all knowing and all seeing, and know all about us Xers and how whiny and stupid we are, unlike the great and allmighty boomers. You can’t go wrong by staying on topic and ignoring the flame bait that occasionally graces the pages of this blog…
Hollywood should remake ‘RepoMan’
As a boomer who cashed out of Santa Barbara, I can report that it is a very difficult thing to do. It is even more difficult to rent with a wife and kids. But, having done both, I seriously doubt that many people have done this. So I find it hard to believe that the decline in homeownership is due to folks like me cashing in. It is emotionally difficult; requires an uprooting. IMO there must be something else causing this.
I would have to agree most of the boomers, I have talked to (my parents included) are extremely emotionally attached to their house. Just the suggesting of selling and renting can result in one feeling insulted.
Congrats on having the will power to make the decision, even though it was very difficult.
I have had the same conversation with my parents - my mother cries when I mention that they should sell, although my father really wants to. I worry for them. I know that they are hoping to make a killing on their place, but I worry that they will need to sell and won’t be able to sell for what they’d like or what they owe on the house. What’s worse is that as a Gen X’er, I know that the reason that they still have debt on the house is that they paid for college tuitions, club memberships, etc. for my sibling and I. And yet again, I hope for the burst so that I can buy a house without leveraging myself to the hilt. We’ve gotten ourselves into a fine mess here, huh?
My experience in seeing my parents try to get my grandmother to sell and more recently my husband’s siblings trying to get their parents to sell suggests a couple of things.
First, you have to have these discussions before the parents become too old and too anxious. My grandmother was just plain paranoid that someone was trying to steal her house. She would not even sign a will. My mother-in-law can not go up and down the stairs and has had several small strokes. She is confused and my father-in-law won’t sell (has no common sense). They are in their early 80’s.
After witnessing this, I knew I had to talk to my mother before she hit seventy. My dad had been dead six years and it was very emotional to leave the house. I knew she would never sell without knowing exactly where she was going.
She already had a winter home in florida (condo), but, get this, needed a summer place large enough for her FURNITURE. Wouldn’t give it up - even 40 year old chairs. I showed her a townhouse i owned about a mile from my house. I sold it to her for what I paid (50% of market value).
I know there is no way that she would have sold if she didn’t know exactly where she and her furniture were going.
middleagedman,
Perhaps you heard that Greenspan wrote a paper on the cash out phenomenon. In it, he identified close to $600 billion taken out in 2004. This included those who sold and bought a less expensive house. There are thousands of such folk here in AZ. Most have a nicer home than they sold, and cash to boot.
I’m not familiar with Greenspan’s paper. But I wonder if the phenomenom is simply demographic timing. Boomers retiring at a market peak; a simple coincidence. Do you have a link for the paper?
I agree. I just met with an agent tonight to sell my place. I told my wife that selling is a committment. When we’re packing boxes we’re gonna wonder why we’re selling. But when you believe in something this powerful, you have to trust your instincts….
Ahhh – the old Baby Boomers vs. Gen X’s debate. The debate that always ends with the usual greedy, tired, old Boomers crowing about how irresponsible Gen Xers like myself are and how we “want everything now.” They always neglect to mention that Gen Xers have no assets because YOU BOUGHT THEM ALL, often buying six or eight to make sure that others can’t get ONE. I can’t very well buy a house when the loan officer at my credit union is telling me my $105k down payment isn’t enough to get me into a starter condo because my $75k salary needs to be $135k. I know, I know – “it’s always been like that.” Right.
Boomers look at literally everything as a potential means to greedily hoard: wine, art, housing, Amazon.com stock, the new model of car like Miata ten years ago or Prius today — or, in the CLASSIC Boomer move, observing what their kids are into and bid that stuff into the stratosphere like comic books, Beanie Babies, or baseball cards. Klassy! I used to be a big fan of capitalism in its purest form, but dealing with the underhanded Boomers has finally convinced me that capitalism needs a healthy dose of socialism mixed in to keep the Boomers from buying up, let’s say, ALL the water and toilet paper, then insisting that “no one else had water and toilet paper until they were 41 years old so everyone please just STFU.” Classic Boomer move. I’d rather have a root canal, or go to an Amway recruiting meeting, than be involved in any sort of transaction with a Boomer.
This business about how people over-consume at 25 is simply laughable, and not the least bit true. All I had when I was 25 was the lion’s share left to pay on my student loan, and a little Japanese compact car (that still runs 12 years after I bought it!). In four short years, while gasoline, housing, and food have spiraled upwards and wages have stagnated, we can always count on the Boomers to shrug their shoulders and remind us that it’s not a problem because these items have been backed out of the CPI.
I save $800 a month, and the house that I rent appreciates by $800 every few days. Just wait until it comes time to “take care of our elders” – I’m going to vote against any bill that gives them any sort of breaks on healthcare, prescription drugs, or whatever else they might need. Guess who I learned THAT trick from?
ARE YOU PEOPLE ALL NUTS???!!! There is NO magical line in the past that makes you a cool “boomer” or a cool “xer” (or a cool “boomer echo”, or…). GIVE ME A FREAKING BREAK! You are being just as bad as the boomers that call us whiney self indulgent morons!
How about a truce, and all of us just calm down and KEEP YOUR EYE ON THE BALL (the bubble, if you’ve forgotten). So stop blamming generations (boomers, xers, echo-boomers, whatever), or professions (re agents, appraisers, banks, flippers, inverstors), and let’s stay focused.
Or not, I find you all so entertaining…
As soon as I get it back from my brother, I’ll send you the DVD I got from the “secret head boomer” on “how to fu*k over Gen-x’rs in three easy steps”. All of us boomers were sent one when we turned 40 (along with a secret decoder ring) and the lessons are still valid. Now that we (the boomers) are all moving into retirement shortly and have successfully tricked you guys into overextending yourselves and screwed up your lives by leading you into poor life choices, I feel we can pass along this vast treasure trove of knowledge so that you may use it against the next generation following in your footsteps. Good Luck hosing them down, it sure is fun!
The smug Boomer that I rent my house from (who bought it for $192k in 1999, which was appraised for a refi in late 2004 at $570k) always jokes about how he’s going to raise the rent, but then he never does, because really he just likes to see renters squirm. I like to think that, by acting nonchalant and saying “do whatever you think you need to do” when he threatens a rent increase, that this takes at least a little bit of the fun out of it for him.
I just want to bring up the fact that the wealthy money is usually the first in and first out. I was a broker in the 90’s and into about 2003. I remember one couple that bought a 2 bedroom little house in Georgetown with CASH in 2002 for $400,000. This was just a small investment for them. I’m sure they are laughing all the way to the bank on their 100% after tax return after they sold out in 2 years.
OCMax,
Funny, most of the “flippers” I know are under the age of 25! I think this whole RE bubble has been driven by greed which gets manifested across all age groups.
Agreed, Most of the flippers and flappers(flapping their gums about realestate) are the young people in my office.
Chillin’ —
Every time a flipper is profiled in a major publication like Newsweek or Fortune, they’re aged 22-28. I don’t think this is because most of them are so young, but rather because profiling the youngest flipper you can scare up makes for a more shocking article.
In the Orange County Register, they love to profile 25 year old multimillionaire mortgage brokers. At one point, I started to believe that those are the people who built this house of cards. However, a quick visit to Newport Beach or San Clemente reinforces the cold reality that Boomers are the resource locusts. Actually, forget locusts, the closest parellel in the animal kingdom to Baby Boomer are domesticated dogs — eating until they vomit, then eating some more.
Talk about the “coddled generation.” They were raised on their parents’ savings, put through school without loans, bought houses with the standard $10,000 loan, again from the folks–who saved it to give to each of their kids, created various Ponzi schemes to bid up the value of their assets, then gripe that “you kids think you have it rough.”
You sound as though you’re both angry and in denial. How about a little patience? If you save cash the way you say you do you’ll do just fine, if you’re patient. Don’t jump out of the gate and buy the first house the bank wants to unload off of its books. Wait. There will be a lot of them.
Then guess what will happen? You’ll be just like one of those greedy hoarders you’re railing about…
Angry, yes. In denial about what? Seeing as how nothing was denied, you’ve begun to make it up as you go along. And the idea that someone buying a house to raise their family in once prices drop makes them a “hoarder” speaks volumes about the Arizona public school system.
Wow for some reason I found that horribly funny. But I think his hoarder comment was meant if you take it upon yourself to buy more than one and use it for a rental. Because, well you can, the price was right, and everybody could use a few extra bucks each month.
In denial about the simple fact that the Gen-Xers are largely to blame for getting themselves in way over their heads. They are to blame. Look around at the excess in the McMansions, all built on HELOCs, 2nds 3rds etc etc. The flipping…
I am in AZ because it’s a nicer place to live than CA — A lot less wealth sharing with the State govt, less traffic, affordable quality housing, less stress, less people, more “normal”… you get the picture. I cashed out of CA just before the last crash. I’ll be looking to accumulate this time, when it’s bouncing off the bottom, WAY DOWN FROM THESE LEVELS - not before. The reason the properties soared in AZ is because CA speculators invaded. They are getting crushed right now, which makes me chuckle.
I know, I know - it’s a DRY heat, though.
I think someone could use an anger management course…
http://www.andersonservices.com/
flippers, flappers and floppers. 3 terms tossed around on thes boarsd. LOL
Like I said, greed knows no boundaries! I know plenty of boomers and Gen Xers who see themselves as Donald Trump wannabes and who will get hurt over the next couple of years. Some of us boomers have lived through RE downturns before and know that prices do not always go up. I fear many Gen Xers (and boomers too) have this hard lesson ahead of them.
I don’t believe this article either. But if it’s true, it’s sad.
The oldest Boomers are also the most evil. They are the 1968/Woodstock generation, the ones who make political discussions so vitriolic. Howard Dean on the left, Newt Gingrich on the right — we all know who they are. Loud, obnoxious, with an air of entitlement.
These people are the worst of the Boomers. The younger ones, those born in the late 50’s/early 60’s, aren’t nearly as bad. They never protested Vietnam, burned flags, or rebelled against anything. It really isn’t fair to refer to these people as “Boomers,” since they have so little in common with John Kerry. These are the people who were punks in high school and watch the “Daily Show” today.
Sadly, these people have inherited some of the Boomers’ irresponsibillity, but don’t have the cushion of the Greatest Generation’s wealth — that’s already been squandered by the older Woodstock types. The 40-somethings came up in an inflationary environment, which later turned into one of falling interst rates, and firmly believe in the idea of a housing ladder. None have had to work as temps, contract employees, etc.; when they got a 10% raise, it actually led to a noticable increase in their standard of living. Politically, their liberals and conservatives both have an air of defeat about them; Jimmy Carter’s malaise will always be present in this cohort. Thankfully, they lack the anger and insane optomism of the older Boomers.
This slice of the Boomers has far more in common with Gen X than John Kerry. If they really are being victimized by the Woodstock crowd, I am sorry to hear that.
Howard Dean may be a boomer, but Newt Gingrich and John Kerry were both born in 1943.
And your political bias is showing when you refer to ‘Jimmy Carter’s malaise’ when Mr Carter was a 1-term president flanked by 2-term Republican administrations on either side.
“In denial about the simple fact that the Gen-Xers are largely to blame for getting themselves in way over their heads.”
Way over their heads with what? They have no assets. I’m the perfect example of a Gen Xer — saving $800 a month in a time when houses appreciate that much in 2-3 days. The Boomers always told us “save for a rainy day! Live below your means!” If I’m guilty of anything, it’s of being too young and naive to understand this was bull$hit advice given to prevent us from competing with them as they snapped up investment properties.
“They are to blame. Look around at the excess in the McMansions, all built on HELOCs, 2nds 3rds etc etc. The flipping…”
The only Gen Xers in McMansions, at least on the coasts and in the cities, are visiting their parents, and will return to high-density apartments later in the evening. I’ve only got a hundred grand nest egg and a $70k-ish salary — what version of reality has me living anyplace except the apartments in the part of town where you’ve only driven through?
“I am in AZ because it’s a nicer place to live than CA — A lot less wealth sharing with the State govt, less traffic, affordable quality housing, less stress, less people, more “normal”… you get the picture. I cashed out of CA just before the last crash.”
Nice move.
“The reason the properties soared in AZ is because CA speculators invaded. They are getting crushed right now, which makes me chuckle.”
God I hope you’re right about that.
OC Max,
Please don’t let this bubble pi$$ you off that much. I am Gen X with 3 kids in a rental. My parents, however are from the Great Depression/WWII era. The only reason I knew to get out of the housing market was because I listened to them, and watched their mistakes.
My family will also have to wait for a long time to buy our next house. It’s likely we won’t buy until 2012 or so. If there is a long-term deflationary scenario coming this way, YOU will be in the better position with no debt and lots of cash. This might be the first generation where renting a house is smarter than buying, even in the long run. Think of smarter ways to use that cash of yours, and go rent a nice house for your family. If you rent a nice place, the waiting is easier.
This bubble isn’t because of Boomers, or even speculators. The feeding frenzy is a SYMPTOM of the problem which is lax lending standards, pure and simple. When lending standards tighten, I think people will be in for a rude awakening. No, prices will not just drop 10% or 15%. It’s very likely they will drop 40% or more. You do not want to be a homeowner in today’s environment.
Thank your lucky stars you have cash right now. Think about how to use it — other than buying a home. There will be many opportunities, IMHO, for you to make real money in the future.
Best of luck!
ca renter:
Being a renter would be no hassle at all except every few years I end having to move because the landlord’s situation changes. But by that time (2002), the country had settled on a decidedly anti-working class mentality, which I never saw coming. 1st time, the landlord’s family was selling to a property management company, and the 2nd time the owner wanted to move their daughter into the house. It’s horribly uprooting, and after the 2nd time I decided that was enough. The 1st time was in San Jose circa early 2000, and thanks to the dotcomedy mania I had to relocate out of the area (luckily I was able to get a job transfer) because there were NO rental vacancies (contrast with Silicon Valley one year later). Getting hustled out of homes and cities get f*cking old — I’m really not hung up on “owning” anyways, as I’m not really picky about needing to customize the home I’m in or any of that as long as everything is functional and not TOO worn-looking. A little stability would be nice though. It all just gets old, and I’m afraid my 20s AND 30s will have passed before the various bubblemanias settle enough that normal people can settle someplace and develop some roots, and some friends that they’ll keep beyond just “till the next move.”
You’re right about the lending environment being the largest catalyst of all. Better yet, before then, it was a function of “roving excess liquidity” brought on by Greenspan’s printing press.
I’m ready for this to be over. It’s tiring.
Just be patient. You’ve sat on the sidelines this long so you might as well enjoy the ride down. I’m afraid the marginal areas will be the first to endure distress - always goes that way. Don’t bite. It’ll drift into the more desirable areas, and before long, you’ll see notices on doors and boarded up windows in homes that had 2 newish cars in the driveway weeks before. Once you see enough of those that’s when you should consider.
I’m afraid I’m not with the folks that sell their primary residence and rent. Of course I didn’t jerk cash out, have a fixed rate and expect to pay it off — actually been throwing extra $$$$ at it which I will stop doing to add to the warchest for a future investment. I rented once in the past 20 years and, you’re right, leaves you feeling uneasy - I can understand. Now, residential investment properties or second home - I unloaded a couple of years ago. Stepping aside out of my primary residence to rent - Not the least bit interested…
“Stepping aside out of my primary residence to rent - Not the least bit interested… ”
Understandable — while making money is always nice, quality of life counts for something too. Uprooting your life sucks ANY way you look at it, even if you’re doing it for financial gain.
I’ll just say this — I hope there is a ride down. Watching the country cheering on the end of affordable housing has been a disgusting display of greed, selfishness, and financial ignorance. Most of America would love to see the bubble continue to inflate. Luckily, if wishes like these came true, the NASDAQ would currently be at 10,000 and the Dow at thrice that, so hopefully the day of reckoning for RE is on the way as well.
Marginal areas — things can’t look too bright for the folks in Bakersfield. The one that piques my interest the most is Las Vegas. If a 1500+ sq foot, ten years old or newer, 2 car garage home in Summerlin falls in price to below $250k, I’m quitting my job, packing up, and setting down roots there without a moment’s hesitation. Then, finally, I can finally “act like I plan to stay awhile.” Hang some pictures on the walls — plant a tree.
For the life of me, I could never understand how people that scraped together every single nickel each month just to make a house payment and then stood in traffic for hours daily, didn’t just come to their senses & leave CA. The smog, congestion, crime, marginal schools, TAX BURDEN… quality of life doesn’t measure up. It will be less expensive from a housing standpoint in the near future but the rest of the concerns will remain. Simply not attractive IMO.
Good luck to you.