‘Extraordinary Boom Is Over’: Greenspan
The Washington Post reports on the former Fed chief. “Confirming what home buyers suspected and real estate sales figures have indicated for months, Federal Reserve Chairman Ben S. Bernanke said yesterday that the U.S. housing market was showing clear signs of cooling off.”
“Former Fed chairman Alan Greenspan echoed Bernanke’s analysis in a speech last night to the Bond Market Association in New York. ‘The boom is over. We can say that with some confidence,’ Greenspan said. But, he added, ‘there is no evidence that prices are going to collapse.’”
“‘This has been quite an extraordinary boom,’ Greenspan told a Bond Market Association dinner. Greenspan said there was a ‘high degree of froth in the system,’ and that it was clear that two things were waning: people using rising home values to pull cash out of their home equity and the turnover of home sales.”
“Analysts were divided about Bernanke’s assessment. Peter Morici, an economist at the University of Maryland, said Bernanke’s comments were ‘right on.’ Morici said he saw the rise in long-term interest rates as healthy, with the economy moving away from its dependence on the housing market and ‘hyper-consumption’ fueled by people taking out loans against their houses. ‘The housing market is going to come back to earth,’ he said.”
“Economist Dean Baker expressed concern that rising interest rates were squeezing homeowners who took out interest-only and adjustable-rate mortgages. Baker said a rising inventory of homes in the Washington region could fuel a double-digit price decline if interest rates climb higher. Condo prices could fall by as much as 30 percent, and prices of single-family homes could drop by as much as 15 percent, he said.”
And from USA Today. “Baby boomers love their real estate. So much that they’re counting on it to help them fund retirement. Since most of them haven’t saved much, they’ll probably need it. Boomers have ‘an almost insatiable desire for real estate,’ David Lereah, the NAR’s chief economist, said. They see real estate as ‘a way to build and protect a nest egg.’”
“Real estate ownership has become a key part of boomers’ retirement plans, says Alicia Munnell at Boston College. That’s largely because the national savings rate is so low, she says, and the availability of pensions is declining.”
“Unlike previous generations of retirees who tended to pay off their mortgages and live ‘rent-free’ in retirement, many boomers see their homes as money in the bank, Munnell says. Many previous retirees also chose to hang on to a house to pass down to their children. By contrast, boomers are more likely to use the equity in their homes, through home equity loans or reverse mortgages, to finance purchases or to help fund their retirements, Munnell says.”
“‘In the old days, you knew you had your house to live in when you retired,’ Munnell says. But given most boomers’ modest retirement savings, ‘You really are not going to be able to hold on to it and not touch your house. You’re going to need the money in your house.’”
Look for more senior citizens in the work place.
Kind of azzholly for him to say that, after endorsing ARMs all these years.
Exactly, thanks for the “heads up” Al.
“No evidence of prices collapsing” — except of course the prices collapsing.
Where?
Yes, where? I’m beginning to doubt more and more that we will see a price pop in most places…as prices drop, the buyers who have been on the sidelines (including me) will begin to buy again, because there’s no way to predict the bottom. So, this may support prices from falling very far and/or fast. You can’t use rental price guidelines to help with the prediction of the bottom, because rents have started to rise. The 50+-years mortgages will help bail out some people. Also, I’m beginning to think that the recent explosion in inventory includes a lot of “let’s see if we can get this price” behavior rather than a rapid increase in sellers who HAVE to sell.
I’m not saying I like this scenario, but it is beginning to look plausible to me.
Homepop — you’re giving up way, way too early. You’re pretty new to posting on this blog, so no way to know how long you’ve been reading it. Assuming you’re not a troll, you must be renting or living with family. Have you done the rent-vs-buy calculations for your area? If yes, what are the numbers?
When AG recommend people to get ARM a few years ago, I was speechless.
Of all the people he knows very well that when we have a phenomenon (in this case extra-ordinary low interest rate) that is on either end of standard deviation, that phenomenon would last long and is transient. He knew these low rates could not possibly last long.
I meant would not last, correction
FWIW: Yall might want to reload puts after this mkt does a reflex bounce. For now, this permabear is all out of the short side
http://news.ft.com/cms/s/7edab4a6-e6d3-11da-a36e-0000779e2340.html
By the end of today I’ll have removed 50% of my short position looking for some sort of bounce over the next few to reload them.
So, chick, what do you think happened this week?
The market was due for a 3%-5% correction as it kept rising in the face of bad news. The market had priced in a 5% FF rate but no further. Now it is possible the FF goes to 5.25% or even 5.5%. The market had not priced that in and recent inflationary data sparked the sell-off. A correction was coming, it was just not known what would cause it. I thought the S&P 500 might return 11%-12% this year, but that was with moderating energy prices and a rate hike pasue at 5%. Since neither looks plausible all bets are off. I am growing less optimistic about 2006 and I think we will enter a recession in 2007. Just my opinion.
Read the article, because the market you seem to be describing (stocks — corporate ownership shares which mom and pop buy and hold and which marketwatch.com and yahoo finance focus on) is not the one TxChick’s linked article addressed — derivatives — Buffett’s “financial WMDs”, which sophisticated Wall Street players such as hedge funds and big investment banks use to leverage their bets on esoteric measures of market performance like future volatility. It seems a good deal of the recent tendency of the headline indexes (gold, stocks) to tank may be related to the bets gone bad in the derivatives market, esp. due to the unraveling of the conundrum (like high housing prices, unusually low volatility is a temporary anomaly which will unravel along with the credit bubble which fed both conditions).
yes, looks like it was caused by a near-meltdown at the London Metals Exchange. Some hedgefunds made the wrong bets in the metals (not gold/silver) market; those hedgefunds get their financing from major British banks.
The Bank of England stepped in by lending Gold to the troubled parties, which they could sell to push down all metal prices. That worked. Most commodity markets were already ripe for a plunge so the selloff was severe.
After this bailout, we can expect more of the same. The hedgies know they are a systemic risk and too big to fail.
Cool — thx for the explanation, nhz. Do you know anything about the possible roll of the BOJ’s plummeting Current Account deposits in this story? I was wondering if a giant sucking sound might be the effect of plummeting current account deposits due to the end of “quantitative easing”?
It reminds me of stockbroker David Johnson’s commentary on NPR’s Marketplace program last evening. He was completely flummoxed about how stocks across all sectors and commodities could all take a beating at the same time. The thought crossed my mind that if BOJ-supplied liquidity played a large role in creating the credit bubble and the conundrum, then nobody should be surprised when the value of fiat currencies go up relativel to overvalued risky assets as the liquidity spigot is turned off.
Try 6% A lock
What this means is that funds who were selling abnormally cheap option premium for “income” (which has worked since 2003) suddenly got trapped too short when the VIX spiked. I imagine things will calm down when the mkt rallies a bit and complacecy will once again be the order of the day. I have had long volatility positions for months now and they were gigantic winners this week. Personally, I think this is just the first shot across the bow and the next legs down will make this one look like child’s play.
so, was I wrong to move half my 401k money currently in the s&p index fund into gov’t treasuries just as it left the multi-year highs, and planning on moving more once a new rally gets going and then the talk again turns to new historic highs? Or is the market spooked enough to not go back to considering dow13000 again in the next couple weeks? There surely has gotta be confusion, which barring jarring events or data might mean more of that endless up-down-even again. I can’t even see a for-real short-term rally unless something truly upbeat shows up. I was expecting a longer and deeper ‘correction’ this time, but that the biggie wouldn’t be coming for a while longer yet. And when does the admission by the two most recent fed chairmen that the housing boom is over affect stuff?! What do traders and analysts think is going to replace housing in this housing 24/7 economy–is it all gonna be selling ipods to China?!
This is too much work for someone just trying to not get sunk on their future retirement pittance, sigh…
And I gotta get a decent intro-level book on all this.
Senior citizens repeat after me,” Do you want fries with that?”
Paper or plastic?
Welcome to Wal*Mart!
Would you like to try a sample of…?
Did anyone see the article about the two elderly ladies that took in two homeless men, insured them, and then orchestrated a hit and run? They collected over two million. Older and wiser…
An old play, Arsnic and old spice.
Sb-arsenic
Think age is getting to me. Arsenic and old lace.
Arsenic and Old Spice. Didn’t Yul Brylcream appear in that on Broadway?
I still don’t get it how the RE is supposed to replace retirement savings, pensions/annuities. How much a boomer expects to pull out from his/her hut, to live as if there is a pension?
Because what I’m thinking is that a boomer has to sell the house first, and that means he/she has to buy/lease something else, right? What’s the pocketed differential has to be to live comfortably, and is it achieable for most boomers? I don’t know why, but I’m doubtful, because nothing in this life is that easy.
IMO this is how it has been sold to j6pk, so it never had to make any sense. Have you seen the numbers on senior citizen credit card debt? Not that any of this should matter much at bond association dinners.
I have an acquaintance who has made a killing over the past 5 years selling reverse mortgages backed by the FHA. There are a lot of limitations, but the rates are not that bad. The downside to that is that none of their children stand to inherit much unless home prices continue their upward trajectory throughout the next 15-30 years.
The model seems to rely heavily on a steady stream of greater fools to replace the home-equity-rich retirees who are downsizing their empty-nest households in order to move off to some AZ condo-golf community. Too bad the crest of the baby boom is hitting retirement age, and the trough will bring on a shortage of greater fools willing to pay more for oversized, overpriced houses.
Yeah, too bad. My heart cries out for the generation of breast implants and tanning salons. Tragic.
What about reverse mortgages?
This will work, but depends on the interest rates. They also tend to be more pricey, and most of the price is upfront. I think all equity release schemes (home reversions, sale-leasebacks, etc.) will take a significant chunk of equity from the homeowners. And given the uncertainty about the future prices I don’t know what to expect.
Not to mention that, if you “bought” recently using one of the many fine “exotic” financing instruments out there with 110% LTV, you don’t have any “equity” to get a reverse mortgage on, in fact you’re currently in the hole (or about to be). Can’t get a reverse-mortgage on negative equity (yet?).
Nothing of the sort so far. Right now, to qualify for a rev. mortgage you have to have 0% LTV, and at least 62 years old.
I also think you do not have to pay taxes on the monthly payment sent to you by the reverse-mortgage company .I know a 81 year old lady that just got one of those loans .
She said it gives her monthly income without needing to sell the home . What ever, the 81 year old said it suited her needs .
Wait till she needs $15,000 to replace the roof, and can’t get a home loan to pay for the repair. Bye, Bye house
Boomers are such a bunch of selfish bastards. They’ll pull out all their equity to support their absurd lifestyles of SUVs, tanning salons, sushi, subzero refrigerators, etc., etc., and leave their kids NOTHING, even as their children are forced to pay for their damned social security checks.
Nice that Ben and Alan have finally connected the dots, about two years too late.
I repeat, AG was the worst Fed Chairman ever. He is a confirmed liar and was responsible for engineering several bubbles and crashes, including the present one. How convenient that he is no longer “accountable” he can throw BB under the bus.
I agree. I think they should do away with the FED all together. They do more harm than good. If they’d let the economy move through its normal cycles we’d all be better off. Only in the rarest of circumstances should they intervene.
In my grad school finance class I slammed AG every chance I got, usually to a chorus of boos. As this housing bubble unwinds, the class willsee I was right.
that’s funny,, in my grad school Econ class I and my fellow classmates always slam Greenspam and the FED…
Not that much of a surprise. Econ’s like efficiency for efficiency’s sake and dislike deadweight losses (the Fed represents a cartel or monopoly which creates deadweight losses.
Finance classes like predictable yield curves which is the FED’s raison d’etre. Greenspan was especially good at giving the markets what they were expecting, so it’s not a surprise that they still think of him as pretty great.
DF, are you the same DF that posts on Mish’s?
LOL… I think AG is now DRIVING the bus. I always heard from my grandfather that bus driving was a great retirement job. I bet AG has a lot of people he would like to see under his tires.
A lot of the info on this blog is an exercise (a fun one!) in language acquisition for me, so excuse my ignorance, but what does Al mean when he refers to the waning in “the turnover of home sales”? I’m feeling a little foggy today but I can’t figure it out.
From what I understand, fewer homes are trading hands (lower turnover than during the boom). High sales volume = high turnover. Low sales volume = lower turnover.
okay, thanks…so he means “turnover in homes” , i.e, “home sales”, not some index I don’t understand like “turnover in home sales”, i.e., some velocity change in homes sales rates or something…
the few speeches of his I’ve known of were so filled with strange-to-me terms and indices that I thought this must be one of them…
cheers!
Fed is again behind the curve. They are now trying to engineer a soft landing. The f’d-up keep rates WAY to LOW for WAY to LONG. Too late. You guys created this mess. Now get out the biggest FUCKING mop you can find and some rubber gloves and start Cleaning up!
“‘In the old days, you knew you had your house to live in when you retired,’ Munnell says. But given most boomers’ modest retirement savings, ‘You really are not going to be able to hold on to it and not touch your house. You’re going to need the money in your house.’”
I am a BB, and I like to say to my fellow BBs, you are a bunch of dumbasses!
Is it me or are the bulk of the Baby Boomers screwed? My parents are Boomers and they are the dead opposite of who is described in this article. I guess Wal-Mart always needs greeters.
… and they need toilet bowl cleaners:
jibjab.com
(Click on Big Box Mart)
“Real estate ownership has become a key part of boomers’ retirement plans, says Alicia Munnell at Boston College. That’s largely because the national savings rate is so low, she says, and the availability of pensions is declining.”
I want to make sure I’ve got that straight: spend everything you make and save nothing over the course of your adult life. Then fund your retirement by flipping pre-construction condos and scooping up single family homes that you can rent out at a negative cash flow. Those boomers have got it all figured out!
Seems to be working.
Man, do I feel o-l-d. When I read these two being quoted an image came to my mind. it was only then that I realized 3/4ths of those reading won’t even remember the image. Reading Ben & Al the image that popped intro my mind was that of the two Marines on the roof of the US embassy in in South Vietnam “protecting” the last helicopter out. April 30th, 1975. http://upload.wikimedia.org/wikipedia/en/a/a8/Vietnamescape.jpg
The parallels are frightening.
Saw that original news photo at the Getty Jan 06 at a special war photos exhibit. Was awesome.
Don’t worry the Simpsons has ‘borrowed’ that scene a couple of times.
I love it when they say boomers have an “insatiable desire for real estate”. uh,no, they have an insatiable desire for money. another flattering portrait of a beloved generation.
And I’ll add to that….they love QUICK money. The hangover from the 80’s, 90’s and early 2000’s is a doozy.
Time for rehab.
Of course, you can already see where this is going. Gen X have an insatiable desire for material things too, so that generation isn’t saving anyone.
You have to save yourself, whatever generation you are in .
Alot of baby boomers need to buckle down and save and pay off the mortgages . The younger people have alot more time to save and pay a house off if they want and not make some of the mistakes that some BB seem to be making .
I don’t really get the boomer bashing here. Are they the group behind I/Os? Its all anecdotal but most of my friends have been doing refi’s to 15s or 10s the last few years. Some locally in early 40s are living in beautiful homes that are fully paid off. I’m at the end of the boomers and although my friends did seem to want the big home right out of college, its nothing like it is now.
Most of the people I know didn’t buy homes in their 20s unless they were married. Even then, they might rent for a while. My boomer friends in MA….all 30s when they bought their first home. Our first homes had linoleum and carpeting and cheap appliances, probably needed a little handiwork….all you youngins turning up your noses at the thought?….well I guess the run-up wasn’t just about us now was it?
I agree with you Upstater. Maybe I run with the wrong crowd; everyone I know well is on track for a comfortable retirement. All of our closest friends were homeowners while still in their 20’s. This group also includes 7 in-laws and 2 siblings.
Where is all this boomer waste and debt?
Agree as well. I’m Gen-X, but think the Boomer bashing is misguided here. Most of the people I know who are doing stupid things (suicide loans, huge SUVs, plasmas, expensive vacations, etc.) are in their 20s and 30s. The most responsible (in a good way) people I know are those in their 70s and 80s and already know what hard times are like.
It’ll be interesting to see how the new “HELOC/reverse-mortgage = pension” paradigm plays out when recent buyers find out they have zero to negative equity in their house(s). Will lenders be willing to keep lending to NEOs (Negative Equity Owners) indefinitely? Will FCBs and mutual fund investors keep buying up boatloads of MBS/CMOs at absurdly low risk premiums forever?
‘there is no evidence that prices are going to collapse.’
Whatever respect I had left for AG diminishes each time I read something like this. I guess that rapidly rising foreclosures, skyrocketing inventory, plummeting sales, cratering HB stock prices, rampant book-cooking at Fannie Mae, and millions of borrowers holding ticking-time-bomb loans doesn’t constitute “evidence” in the Maestro’s mind. Oh, and that insane real estate run up — that wasn’t a “bubble”, it was a “boom with a high degree of froth.”
= my attempt to shut off italics.
My attempt
“Economist Dean Baker expressed concern that rising interest rates were squeezing homeowners who took out interest-only and adjustable-rate mortgages. Baker said a rising inventory of homes in the Washington region could fuel a double-digit price decline if interest rates climb higher. Condo prices could fall by as much as 30 percent, and prices of single-family homes could drop by as much as 15 percent, he said.”
Wow, as much as 15%!? That would get the DC region back to where, about January 2005? So it would’ve made sense to buy a house in mid 2004 then? I wonder what Dean’s opinion was in mid 2004? Oh yeah, he was already calling the market a bubble.
There is a lot of comfort to people that thought about buying last year with little down and chose not too.
@John in VA,
PLEASE CLOSE YOUR ITALICS [/i]
lets see if this closes the italics.
didn’t work, one more try
I tried!
And from USA Today. “Baby boomers love their real estate. So much that they’re counting on it to help them fund retirement. Since most of them haven’t saved much, they’ll probably need it. Boomers have ‘an almost insatiable desire for real estate,’ David Lereah, the NAR’s chief economist, said. They see real estate as ‘a way to build and protect a nest egg.’”
That’s why I believe this market correction is going to last over 20 years until all the boomers whose only next eggs are their homes have sold. Unfortunately most of them will sell off the peaks and are not going to get as much as they think they would.
Now it’s already too late, it’s painful to sell at 30% off the peaks now for a quick sale, but the longer they wait, the less they will get.
I love to do this.. insert the words ” (dot com) stock” for the word “real estate” in the above referenced quote.
Freaking scary ain’t it?
Just another reason that Social Security is not going to cut it for these folks. The article makes a great point, that most retired folks did not have monthly rent/mortgage payments. That’s what made it possible to eke by on SS plus hopefully something like a life insurance annuity, modest pension, minor part-time job, etc. Even people who had not been able to set aside much could at least not have to work-and many of these were people who lived through the depression and knew how to cut back when needed. You’ve got a group coming in now who not only will have insufficient income to support their lifestyle, they will have no way of significantly cutting it back-they still have to pay for housing, and trying to imagine them cutting back from going out to eat 4 nights per week and taking a couple vacations a year to making a box of mac and cheese last two days seems very unrealistic.
Just wait about 10-15 years. You will hear the biggest clamor to increase SS payments from these whining boomers who will claim that it does not ‘even’ cover their basic living expenses-well guess what, that’s going to be their fault due to the reasons described above. You will have senior citizens ‘trapped in poverty’, who when they were in their peak earning years were buying hummers, mcmansions, all excesses. I hope the climate is hostile to them. It will have to be: at current birthrates, there will be 2-3 workers paying in for each retiree, as compared to 4-5 in recent years, when it was still going broke. Unless of course amnesty goes through. By the way, I think this is the biggest rationale behind the amnesty argument.
“By the way, I think this is the biggest rationale behind the amnesty argument.”
I think you hit this on the head.
Something else think about, and I am not trying to add this to the discussion as a moral issue, but just as a fact; would we need this high level of immigration to fill the population gap had there not been so many millions of terminated pregnancies over the last 30 years?
On the other hand would we have had to build even more prisons to handle these unwanted children?
Chicago economist links abortion to falling crime rates
http://chronicle.uchicago.edu/990812/abortion.shtml
Note: This is the same guy that figured out that RE agent’s stay on the market longer and sell for a higher price than that of their clients.
“On the other hand would we have had to build even more prisons to handle these unwanted children?”
Maybe so, but I would suggest that abortion is not an effective long term crime prevention tool.
My point was a mathematical one, in that, with more than 43 million performed since 1973, many of whom would have had their own children by now, we have a population gap that is now being identified as a possible reason to encourage mass immigration.
Joe,
With all due respect, these abortions were probably performed on young, unmarried, under/uneducated, poor females. It’s interesting that Republicans, as a rule, are against abortion and against welfare at the same time. Can’t have it both ways.
If you want to support the anti-abortion movement, the “pro-lifers” have to be willing to pony up the entire cost of supporting all these children and thier mothers for at least 18 years. Otherwise, you’re just looking at the endless cycle of more poverty and higher crime, IMHO.
(Note: I am staunchly pro-choice because I don’t believe it’s my right to tell others how to live their lives if it doesn’t affect me. However, I am personally anti-abortion. Just don’t want to get too political here.)
Sorry for O/T.
Ca renter:
All of your points are excellent.
I was not trying to make a political statement. We have a demographic bubble that is yielding an economic problem with regard to unfunded liabilities shouldered by a less populous generation, thereby making mass immigration more tempting.
Boomers having fewer children are part of the reason for the demographic gap, and I was only pointing out a significant reason for this gap.
I am for immigration for this reason, lots of it, but controlled and from a multiple of countries including Mexico.
OT/ I will admit to a bias, my wife and I adopted an unwanted infant 11 years ago that almost didn’t make it into this world. I consider my position to be staunchly pro-adoption.
Except, this only builds to the problem, these people do not make enough to really build up the reserves, and often consume more than they bring to the table.
Most of the illegal immigrants would qualify for the Earned Income tax credit. They also will qualify for SS and Medicare.
Think about that one! Actually, if most BB really knew what this unchecked immigration was going to cost them, they would be demanding that the borders be locked down.
They will be too old weak and feeble to do anything about it when they are regreting these choices.
Bingo. We cannot assimilate a large population increase from Mexico and parts south and immediately make these people eligible for the social programs/benefits that our society provides. It’s just won’t pencil, regardless of how hard these people work and what great people they may be.
Alot of them are already paying SS on fake SS numbers.
they will never see a dime.
not if the Senate gets its way. you didn’t see thursday’s vote?
Shame on you Greenspan. You are a fraud. The banking elite, congress, and any other number of your connected friends have profited handsomly off your “open tap” fed policies.
The scary part of that UST today article:
“Boomers own 57% of vacation homes and 58% of rental property, according to the NAR.”
Most of those will be released to the markets during the next two decades. It’s going to be a long Japanese style slide down Mt. Everest to Indian Ocean.
Correct. Oversupply of housing. Maybe we could allow open immigration? Lower our “admission” standards to that of our loan standards. And of course grant amnesty to all here currently illegally. Anyone with a pulse (or who can fog a mirror) will be granted citizenship. Then we can restore the SS payor to payee balance.
you want to be competitive with china? you will have to match their population and wages.
So? This is like, imprtant or unexpected or even worth mentioning? Boomers are supposedly those born 1946-1966. Who else would you expect to be owning discretionary property in 2006? Truth is the greatest gains in homeownership in the last decade were made in the Gen X and Y age groups.
Nothing scary here, just UST trying to stir up intergenrational strife so they can report on that. Well it worked; those damn lazy ingrateful kids getting their houses earlier and participating in an unprecedented run up caused by the economy put in place by the boomers. What? Don’t like that? Every bit as true from exactly the same factiod that raised a warning flag about boomer ownership. Perspective is all.
They are getting their houses earlier.
They are not owning them earlier.
I’m not one for the intergenerational thing, but facts are facts.
Robert,
I have to wholeheartedly agree with you on this one. What would have been more satisfying to read would be how much longer the average boomer has on their mortgage payments and whether they have alternate sources of money to continue to pay that mortgage until it is complete.
(I still don’t get it how the RE is supposed to replace retirement savings, pensions/annuities. How much a boomer expects to pull out from his/her hut, to live as if there is a pension?)
Perhaps some of my fellow boomers are old enough to remember the “bag ladies.”
Another blast from the past: “Senior Vittles.” So old even google doesn’t bring up a good reference.
I never got that. Rice and beans is a hell of a lot cheaper than dog food.
I like red beans and rice. Just season it (I recommend Tony Zacharans), whip up some corn bread, and that’s good eating.
Tony Chachere’s, dammit.
Do you remember “plunk the magic twanger froggie”? I may be the oldest person on this blog.
This is supposed to be a family friendly board!
That my friend is from Howdy Doody. I knew I was older than anyone else.
I don’t know , how old are you ?
My sister was ON the Howdy Doody show, in the Peanut Gallery.
I believe “plunk the magic twanger froggie” is from the Andy Devine show (Andy’s Gang. Midnight the cat played the fiddle, of course.) See http://tinyurl.com/q6e5j for a picture of Froggy. He didn’t look as good in B&W. Whoops, I may be the oldest here.
I remember turning on the Indian Chief on Sat morning waiting for programming to start.
How about “holding-the-bag” ladies?
explain this concept that you call “bag ladies”
The old folks can take out a reverse mortgage. That is, of course, until the company wants a payback like that 92 yr old woman in a nursing home. Article was here a few days ago.
I think this warrants repeating:
if you “bought” recently using one of the many fine “exotic” financing instruments out there with 110% LTV, you don’t have any “equity” to get a reverse mortgage on. In fact, you’re currently in the hole (or about to be). You cannot get a reverse-mortgage on negative equity (today), though perhaps those wizards from the Realtor-Mortgage-Industrial Complex will manage to work something out when the Boomers get ready to retire.
Hold on Greenspan also said….
Greenspan said he doesn’t see home prices falling on a national basis, but instead in certain areas of the country. He warned reduced access of Americans to equity loan extraction would have an economic impact, which has had an “important effect” in stimulating the economy.
http://news.yahoo.com/s/ap/20060519/ap_on_bi_ge/greenspan_speech
Just as housing hasn’t risen all that much on a national basis, just in selected “pockets”. This won’t make the downturn any less painful for people in these pockets. Of course, these pockets now make up about 60% of the metro areas of the US and contain all of the most important and populous areas. AG is a duplicitous AH.
Anyone see John Talbott (author of “The coming Crash in the Housing Market”) on bubblevision (a.k.a CNBC) this am? Pretty funny slam on David Liar-eah. Also said S.D. condo prices are ALREADY down about 30%.
“‘In the old days, you knew you had your house to live in when you retired,’ Munnell says. But given most boomers’ modest retirement savings, ‘You really are not going to be able to hold on to it and not touch your house. You’re going to need the money in your house.’”
You should check out the severity of the problem ahead on the Frontline program, “Can you afford to retire? Baby boomers are heading for a shock as they hit retirement: vanishing pensions and inadequate 401(k) savings. What can be done?”.
http://www.pbs.org/wgbh/pages/frontline/retirement/
It’s going to be scary for those trying to live off their houses in retirement and have no money saved.
The baby boomers have 5 to 15 years to save more for retirement . I hope the BB’s get real serious about doing this .
The BBs may get serious. However, most people don’t know how to manage money, or even worse, how to invest. With pensions, companies would pay for and manage the retirement funds for you. Under 401(k)s, the individual has to put in and manage the funds themselves. Most people don’t even change their investments once it’s set up initially (myself included until recently). Luckily, I moved most of my 401(k) out of stocks before the recent market drop. Personally speaking, it’s a lot of work, and most people don’t want to deal with it. Even if BBs do decide to get serious, they are losing years of compounding.
What is everybody so worried about? We don’t need a house or a lot of money. We can just tour the country in a VW Micro-bus. Or start a commune in Idaho.
You guys, always underestimating the baby boomers.
We’ll re-invent retirement like we re-invented everything else.
Long time reader, first time poster. I thought I’d share a recent experience which doesn’t prove the party is over BUT is pretty fun. I just got back from jury duty and thankfully didn’t get on a jury. I got to jury selection for a case involving two losers (the defendant is currently in jail - an unrealated crime) who were business partners - their business? . . . you guessed it real estate speculation! One was sueing the other for bad business (losing their money) as well as punitive damages - good times. The experience was interesting on two levels. One - the above angle and Two - how many perspective jurors had been screwed over, in some real estate speculation deal. I actually was one of them. My story dates back to the ‘89 bubble where my parents without my knowledge “invested” an inheritance of mine (20k) along with their own money into my dead beat second cusion right before the bust - lost it all. The only good thing that has come out of that experience was saving me from suffering through an extended jury service (I got excused - surprise, surprise). By the way this happened in Los Angeles - I’m sure this type and a whole lot of other types of lawsuits are going down all over.
that’s funny!
I served on a jury recently…medical malpractice…but when they asked people jury selection questions of the standard “have you ever been involved in a law suit” type, at least 5 people of 20 or so had, and 4 of them were about RE! Not necessarily speculation, but RE are such big transactions that its not surprising they end up in court a lot….
So can someone explain how all these boomers are going to be able to sell their houses AT THE SAME TIME and make all this money that they will then use to… um …. and then move to… er…
Something doesn’t quite work in this equation.
What I’ve seen is, they sell their house for, say, 250K, then over time hand it over each month to a retirement home. Oh, and leave their kids NOTHING.
“Oh, and leave their kids NOTHING.”
what is wrong with that anyway? maybe it is bad if the parent didn’t even bother saving for the kid’s college.
… and expect the children to take care of their financial needs at their twilight years.
Not happening so much because of the high divorce rate. Seems that when parents divorce, their attention turns from their children to their new romantic lives (and just trying to make a living, in many cases). The children get jaded and when the tables turn, it’s revenge time.
http://www.jhu.edu/~gazette/2000/feb0700/07boom.html
Never underestimate the creativity of Leviathan. Someday we could wake to the creation of yet another federal agency or huge subagency that owns residential property and “rents” it out to seniors at, well-gosh-maybe, a taxpayer-subsidized rate. Lemme see — a source of such property — mabye some of that Fannie/Freddie-held stuff? Or properties held by belly-up banks that the FDIC will have had to bail out?
The BB will sell them to each other. Then they will make each other rich. And lots of Walmarts opening up, so they will have their job security taken care of. And, all Walmarts seem to have a McD’s in it. So it is either Good Day - here is your cart, or “would you like fries with your Big Mac?”
i thought our economy enters recession when normal consumption falters. what happens when “hyper-consumption” falters?
..a hyper-recession?