Young Adults ‘Fear’, Peer Pressure Drives Purchases
The Olympian has this update from Washington. “More adults younger than 30 are entering the real-estate market, and many are doing it at ages uncommon a decade ago. In 1995, people 25 and younger bought 172,000 homes nationally, said Walter Molony, spokesman for the NAR. In 2005, that number jumped to 501,000.”
“‘There seems to be a lot more peer pressure, more parental pressure to buy at a younger age,’ said Warren Ballard, (who) sells new condos and conversions. ‘The attitude really has changed.’”
“Although Seattle-area real estate is more expensive than ever, a tiny studio at the new NoMa Ballard condo building in Seattle, for example, starts at $180,000, it’s also more attractive than ever for young singles to buy, with cheaper conversions of apartments to condos, creative financing options and slick marketing campaigns aimed at them.”
“But there also is fear among young adults, and their parents,that they won’t be able to afford real estate in the future.”
“Young buyers are making major compromises and using creative financing to buy their first homes, including recruiting roommates or siblings, borrowing from parents, sacrificing space and living in less-desirable neighborhoods.”
“Dawn Wiggin, 27, decided she was ready to buy her own home only weeks before she signed the paperwork for a condo in NoMa Ballard. But the 475-square-foot condo, priced in the low $200s, will be tough financially. The mortgage is $700 more per month than the one-bedroom apartment she’s currently renting until her condo is finished this fall.”
“Until she bought her condo, Wiggin had extra spending money to travel and meet up with friends for happy hour. She also treated herself to a big vacation every year and took lots of weekend trips.”
“But the mortgage will require her to cut back. She’s considering limiting shopping to one big item a month, and figuring out a low-maintenance hairstyle. She also plans to limit weekend trips and will throw dinner parties at home instead of going out with friends.”
“‘It’s going to be a challenge,’ Wiggin acknowledged. ‘I’ll be paying a lot more, but it’ll be fine. It’ll be a great investment.’”
“Taylor Halverson’s mortgage is $400 more than his last rental, but Halverson was cautious about how much he could afford. The mortgage for the condo (around $200,000) has forced him to cut back on little expenses, like picking up breakfast on the way to work and buying lunch.”
“While Halverson was among the first of his friends to buy a place, he said he didn’t feel any pressure. Still, when asked what prompted him to buy at such a young age, he responded: ‘Is 25 young?’”
The two brothers buying a 900 sq ft house together; how could that possibly go wrong?
I once heard an incredible percentage of homes in the northeast US are owned by under 25’s; something like a quarter(?!)
Thanks to the reader who posted this link.
Another reason for younger people getting into the market may be the incentives. Just this morning on the way to work I saw a billboard that just about made me run my motorcycle off the road. It was from a local real estate company and stated “Get your dream house for O down and go on a 7-day cruise!”
I figured that only very naive home buyers would fall for that.
A couple months back, the Seattle Times gave this advice on buying overpriced and unaffordable RE:
Buy with friends. Yep. That was their advice. Buy with friends.
Seattle realtors and press kept up with the scare tactics way too long. It’s only within the last week or two that there are signs of them letting up and shutting up.
Until they cut it out completely though, they’ll be scaring young people to buy in. And a ton of condos are just coming on the market here that need to be sold. So I think they’ll keep it up for a while longer.
It’s funny that the housing market that kept the economy afloat with equity loans is now going to drag it down with housing costs so high people can’t even afford to frequent their local coffee shop, etc.
Buy with friends? Insanity. I actually have friends who bought condos with other friends. I once asked the usual questions - so what do you guys do when one of you gets married, if your friendship ‘ends’, if one of you loses your job, etc., etc. Those questions either didn’t have answers or the answers were along the lines of, “We’re hoping that won’t happen.” Egad.
Hope floats.
But they all float down here. When you’re down here… you’ll float too!
Unless… you’re underwater!
But the 475-square-foot condo, priced in the low $200s, will be tough financially.”
This works out to about $470 per square foot depending on the exact price. Ah, the follies of youth. Maybe she can flip that closet…er, condo.
There’s a whole lot of life to live at 25. It is easy for the young to forget that when caught up in a peer pressure frenzy. Ponzis, ponzis everywhere, and we’ve fresh run out of dinks.
This housing bubble has caused a corresponding albatross shortage. Methinks this will be changing right quick.
Albatross! Albatross for sale! Get your albatross here!
This is unbelievable. At that age I was moving around back and forth and all over the place, and I’m glad I had that freedom. Then, I wasn’t even thinking of buying. Now they are going to be stuck in some little SB like that? Holy moly this has gotten out of hand.
My current 1 br rental has gotta be something like 600 sf and it’s okay for me, but feels decidedly tiny– I couldn’t imagine someone else living here and even a weekend visitor is getting pretty tight. Buying a 475 sf place for that much is unimaginable.
Anyway, there have been a ton of purchases just like that in San Francisco. Owners will chop up a place into a bunch of tiny apartments, and sell them as condos for 300-400K apeice. People have been buying them right and left saying stuff like “first step toward moving into something bigger” or “Getting my foot in the door” and my favorite “I’m only going to be living in it for a couple of years.”
Something about that just always seemed instinctively wrong to me, and reading the bubble blogs I now know why.
This is unbelievable. At that age I was moving around back and forth and all over the place, and I’m glad I had that freedom. Then, I wasn’t even thinking of buying.
Same here! I moved back and forth from Philly to Chicago so many times we joked that I created a rut in the road! Not to mention the traveling I did. But it didn’t matter…I was young, single, mortgage free. It was AWESOME! I wouldn’t trade the experiences I had for a mortgage at that age - EVER. ESPECIALLY for a 475 sq. ft. condo. Please!!! When you’re 25, all you have is hope for the future. Why are these kids caving?
475 square feet? You can get a bigger room at Motel 6.
No lie. Buyer got robbed! What is wrong with people… arrgh. People like that are why we have a bubble.
475 sq. ft. in the low $200s? That’s almost an impossible dream in NYC.
“But the mortgage (reverse financial flotation device) will require her to cut back (like cannibals on Maria Schriever). She’s considering limiting shopping to one big item a month, (rice OR tamp*ns) and figuring out a low-maintenance hairstyle (pulling her hair out). She also plans to limit weekend trips (to the mission, on soup day) and will throw dinner parties at home (alone, with a hunched back, and rice) instead of going out with friends (now…. aquantances).”
I
Ouch… it buurrrnnnsssss.
Re: your hunchback comment.
It sounds like Dawn might have more space if she roomed with Quasimodo in the Bell Tower!
“and figuring out a low-maintenance hairstyle (pulling her hair out).”
LOL! Good one!
Moopheus: Seattle is not Manhattan. Not even close.
Talk about borrowing from tomorrow’s demand . . . you essentially have 10 years worth of FTB’s buying in the space of 3 or 4 years. That means that for the next 5 years, the number of FTBs will be smaller. It’s like squeezing a balloon - if they pop up in today’s demand they cannot be there as FTBs in the future.
Who will hold up the pyramid?
I’ve been say that for years here in SoCal to my bubble-loving friends. All the children have bought houses (or two or three), who’s left to buy?
Me! (But not in SoCal)
And not until the bubble is completely out of air…
Immigrants, legal and illegal.
Ah, yes, illegal immigrants. Their wages ought to keep this bubble afloat. And for those that argue there isn’t enough manual labor to keep the day laborers “gainfully employed,” never discount sex work.
You really have to ask yourself do these folks have parents or older advisors. 200k for 475 sgft. WTF was she thinking? Way too many hours playing video games as a youth I guess.
what games did their “wiser” parents play?
“Sugar Cube”
That’s part of the problem - these folks have parents or older advisors.
well said.
Max-
You really think so?? What parent in their right mind would advise their kid to spend 200k for a 475 sqft condo. Come on I would smack the s*** out of my kids if they brought that to me. I would think that in this area she bought there had to be better opportunities than a 475 sqft condo for 200k. Isn’t that like the size of a single or something. Sheesh
I talked two of my three children out of buying in the current market, and also a good friend whose elderly mother was pressuring her to buy. All it took was a stream of feeds from Ben’s blog posts.
You should be proud of yourself, not for your “wisdom”, but that they actually still listen to you. Anyway, that is us, those who read this blog. What percentage of the total populace knows this?
Dear old dad kept trying to talk me into buying. Told me I can’t go wrong, “housing prices never go down,” “real estate is the best investment you’ll ever make,” “they aren’t making more land.” You know the drill. Well he did more than talk… he did give me a large sum of money for a down payment. I took that and it’s sitting in a CD. Showed him the blurb on Patrick.net recently and now he’s giving me real estate downfall reports from the Central Coast. Looks like their having some price drops in the old neighborhood.
Congrats Chip.
My oldest isn’t about to buy in this market either.
She watched her aunt and uncle go over the deep end over leverage, juggling credit card balalnces. Most kids aren’t stupid.
And not about to become slaves to the mortgage banksters!
“Mortgage banksters” - great one, hadn’t seen it before — LOL. Thanks.
I tried to feed blogs about Queen Creek, AZ to a stepbrother.
No such luck a DINK couple with a 3000 SF brand new home in flipper central Queen Creek, AZ.
They just moved from Palmdale so the vacant home, foreclosed neighbors should remind them of home.
“…475 sqft condo for 200k. Isn’t that like the size of a single or something. Sheesh”
My 1bdr apt is 780 square feet.
Best I remember, and it’s been a l-o-n-g time — 475 sq.ft. is what you want when you’re dating; 780 sq. ft. is what you want when you’re newlyweds; and 1,560 sq. ft. is what you want when somebody forgot to take her pill.
multiply that by 2, 5, and 10 respectvely.
On the houses I’ve been looking at recently, I’ve seen a couple of wood back porch/decks that were about 500 sq ft. Most garages, too, are about 22×22… but then we’re not talking “young, urban demographic”. In that sense, the room I rented for my final year of college 20 years ago was about 300 sq ft, and cost $180/month. Can’t imagine buying such a property.
Two years ago my parents suggested my wife and I “upgrade” here in SoCal from our condo bought several years ago to a SFH. Got the ol’, “They aren’t making any more land” rationale. My hope is that my parents are disconnected from real estate prices here in SoCal; I hope that if I were to go to my parents and show them hard numbers, they’d advise against buying, but who knows.
Oh yeah, relatives pestering their young adult children to buy homes or be “priced out forever.”
I was married fairly young (21) and once it became obvious to my inlaws that I was staying around for awhile, they began pressuring my husband and I to buy a home or “be priced out forever.” Did I mention my father in law is a California real estate agent?
Over the years, I’ve learned one thing: I will never buy a home out of fear or peer/parental pressure, ever. Especially if it means I have to make extreme sacrifices like not ever going out with friends and staying home eating ramen noodles all the time. Sorry, been there, done that, and it sucks. I’d rather rent forever.
Now, I am not against home buying. I am just against people becoming homeowners if it had the potential to bankrupt them and make them miserable from day one of purchase.
Also, homes are not necessarily the best “investment” either. They can be a great source of profit if you 1. manage to buy at the right time (i.e. buy low sell high) and 2. have some luck on your side (as timing the housing market isn’t a definate thing).
This is OT, different part of the country, not sure if was posted yet. Any Orlandonians out there? Interested in input on this “Orlando is different” report from the NAR.
http://www.realtor.org/Research.nsf/files/Orlando.pdf/FILE/Orlando.pdf
And why are they saying there is no bubble in Orlando, I thought there was no bubble anywhere? Many in Orlando are vicious in their agreement with these stats. Anyone agree, disagree and why?
Bagdad Bob the real estate agent ( There is no bubble in Orlando florida )You have to love it,
I live in the Orlando area…Most of the jobs are service related.
You have Lockheed, Seimens and some defense related stuff.
Real Estate has come to a complete halt…Nothing is moving… Inventory is building…I dont know if prices are dropping, but they
sure arent rising….I think we were in the top 5 for condo conversions also….Should be interesting.
I am a lifelong Orlandoan. Believe what those folks (in your ref) tell you at your peril. Prices are down already and we’re just getting started. Do you have any friends with ARMs or Option ARMS? If yes, have you talked to them about real estate lately? If you are here to learn so that you can protect your money, just read all posts, every day and make up your own mind. If you are here as a one-time-only visit, hope you enjoyed it.
I am from southwest Florida, I have been here all my life. I have seen this in the 70s the 80s late 90s but this time I dont think Florida will hold up, the jobs are service related for the most part. Tampa has a seaport, Orlando has the mouse house, but south of that its all built around building and medical, prices are down, building is slowing and the long time middle class retirees are cashing out and moving north, we have alot of homes with no one in them, I know alot of what you read is paid for by the real estate market, ( with the strong job market ) the job market is dropping faster than the sales rate, the number of jobs that will be lost due to this bubble will drive this area into the ground. Chip is right its just started.
“a lot of homes with no one in them”
Boy, you’re not kidding.
It gives a whole new definition to the term “ghost town”.
Thanks, Chip. I actually sold my house in Orlando last year, I could not believe that someone wanted to pay me so much $ for a house I paid 91% LESS for 2 years earlier! I’ve been trying to convince my friend not to upgrade, his house is in Orlando. Told him to (try like hell to sell and) rent for a while, and he pulled that article on me. I told him he is out of his skull to believe anything the NAR says, especially that cr@pola. Was interested in hearing what others thought. Chat w/ya later.
UW — good for you — you skated to your maximum possible advantage, it appears. If I had bigger bucks and younger cojones (note the very careful selection of adjectives), I’d be a vulture waiting on the wires over Interlachen.
Oh fer cryin’ out loud. It was only a few months ago that the NAR issued an almost identical report for Port St. Lucie.
Would someone remind the NAR that it is THE FEDERAL RESERVE that has raised interest rates 17 time over the last 2 years. FEDERAL means every lender in every city in USA has higher interest to charge. You cannot seperate out Orlando from Boise on the Federal Reserve level..Sorry Orlando your borrowers are going to get stuck with adjustable arms just like everywhere else.
“It’ll be a great investment.”
I can’t believe we’re still hearing this. These poor folks and their parents have no concept of what a great investment is. They have one criterion for an “investment”: Any piece of property they can scrounge up financing for.
Maybe they mean investment in a learning experience?
Bearnanke — LOL — I’ve known a couple of parents like this — Scrooge types who were parents of friends of mine. But they were so Scrooge-y that they would not bail the kids out. Big-time, for-sure meanies. Glad they weren’t my relatives.
School of hard knocks, baby. Good judgement comes from experience. Experience comes from bad judgement.
It is last desperate stage of capitalism, leeching off younger generations. Everybody who goes to college now graduates with a huge student loan to pay back, after having it drilled into them from birth how important education is of course. Gee who will pay down the national debt i wonder?
The kids are perfect, they make great cannon fodder too, nice and trusting of their elders.
Catspit — guess you’re not a Libertarian, huh? I’m always looking to recruit. Almost no one picks on me for that, since it’s a bit like being on the Jamaican bobsled team, but I recommend you (or other bloggers here) read Dr. Ron Paul’s writings some time.
Capitalism is done here. It’s all about rewarding debtors and consumers while waging all-out economic war on producers and savers.
I wish someone had told me when I graduated(99) to buy a home!
John — wait ten years. Buy a home.
Dad
LOL!!!
Even better, don’t bother to enroll your kids in gradeschool.
They will be much better off if they use their pristine credit to buy a house. That will take care of everything.
Literally, I have had a bull say that college is a waste, just look at all the smart people on the HBB blogs that are educated and priced out.
I’m 28, and a lot of my peers bought, fortunately in not-so-expensive Denver, CO. One couple bought here in SF Bay Area, for a whopping $900K after selling their condo. Still, seems a bit too much for me, and I don’t know how they make the numbers work.
Still, seems a bit too much for me, and I don’t know how they make the numbers work.
Probably not very easily. At 28, 29? They are either making a sh&tload of money, are getting help from someone or are wrapped up in a voodoo loan from hell. I know people my age (mid 50s) who have been working for years, making respectable incomes (some in 6 figures) who wouldn’t DARE think of tackin’ a million dollar mortgage. Fortunately for your peers, income increases (and they will definitely need them!) will help them stay above water. But as we all know, fundamentals are out of line. That $900k purchase was a HUGE gamble. Keep us posted on how they are handle the next 12 months.
BayQT~
The question I always want to ask people who buy incredibly overpriced condos is, “Do you think you’ll be able to find someone to pay you even more for this place in a few years? Will they pay $300,000 for a 475 sq ft studio condo…in other words, $3000/month or so?” Maybe…but I SERIOUSLY doubt it!
What is more likely is that this woman will be driven to bankruptcy as a result of this purchase. Then she won’t be able to buy once credit standards have tightened back to normal standards and prices have fallen to afforable levels. As one poster mentioned, this is going to hurt normal demand for real estate for years to come. ay, yi yi…
Is it likely that credit card standards will return to normal?
Just wondering…
475 sq ft is basically a studio. A one-bedroom apartment is more like 600-800 sq ft. So she’s paying $700 more a month to live in a smaller place, perhaps more if there are hidden costs she hasn’t considered or she took an adjustable rate mortgage. That’s a lot of ‘cost trimming’ to fit into an apartment, and it’s hard to believe she wouldn’t be better off actually ‘investing’ that money rather than paying interest on a tiny condo with it.
Hidden costs are a good point. A tiny place for $200K probably has all the ‘amenities’ that come with a hefty HOA fee every month.
I know where this place is. The HOA fees start at $200 per month. And She probably does’t have a parking space. Places like these were abnout 150k a year and a half ago. Houses in the area start at 350k for a 900sf piece of junk.
On the other hand, I understand why people at 25 are in the game, besides the fear and the peer pressure - people enter full-blown adult life early nowadays, and cheap credit is available to anyone, just show that you breathe and hold that pen tight when you sign.
I remember, when a few years ago, as I just landed my first real job, they virtually begged me to finance my new car, even thought I couldn’t come up with the proof of my employment, etc. Also, buying a condo was pretty much a “done deal” according to my realtor friend.
I don’t know whether this easy climate will continue for the younger generation, but certainly they enjoy certain privileges that were out of reach a few years ago. Maybe it is a permanent social/demographic change.
When I was 25, I could barely show up for work on time, much less take on the responsibility for that kind of debt. Man, you don’t get many years in your life to be young like that and a slacker. Why on earth would you want to tether yourself down.
It is too much fun being young and without obligations. I was the same way. Nothing more fun than telling an unreasonable boss to stick it where the sun don’t shine. I doubt if I would have had the nerve if I had a huge mortgage around my neck.
Hence the reason I rent and spend 3-4 nights a week out with friends (not getting drunk but a drink here and there). If I go into work tomorrow and I’m fired, looks like a nice mini-vacation.
Different times, different priorities. When you were 25, Txchick, you wanted the freedom to live your life and discover yourself.
Today’s 25-year-olds have already been told who they are: Nobody, unless they have a closet full of designer handbags and are already halfway through their first Mercedes lease term. Shoot, 10-year-olds are more image-concious today than I was at 25.
That’s the motivation for these young buyers, IMO. There are girls from wealthy homes in OC prostituting themselves for cash to spend on clothes. Signing up for a lifetime of debt is surely preferable to that.
Nothing more fun than telling an unreasonable boss to stick it where the sun don’t shine. I doubt if I would have had the nerve if I had a huge mortgage around my neck.
The little dear in the $200k matchbox condo says even with her mortgage, she can’t do without her “one big purchase per month.” Somehow, I don’t see her being the take-this-job-and-shove-it type.
More like the take-this-card-and-max-it sort.
“When I was 25, I could barely show up for work on time”
Really and in my case being sober was considered a very foreign concept.
Add to above
Not exactly the time to take on 200k in debt.
sign me up for the edit button please
talked a young female borrower out of buying a condo (at her mother’s urging). she wasn’t even out of nursing school and was looking for an 80/20 io arm. flat out told her that if she was comfortable in paying $168,000 for a condo that had sold in 1991 for $15,000 then i would do the deal. fortunately she declined and bought a backpack instead (also my idea). can you imagine being upside down by $40,000 or $50,000 on a condo at 22 years old. guess there will be quite of few of these hapless souls out there.
That’s exactly where I was at 25. I bought a condo at the peak in ‘90 for $104k, and by ‘94 it was worth $80k. I was more than $20k underwater and couldn’t sell. Luckily I didn’t have to move.
And how much is it worth now?
“…if she was comfortable in paying $168,000 for a condo that had sold in 1991 for $15,000…”
Holy Moly — I got to tell Billy Bob about this — I told him, right when he got married, “Billy Bob, now you take the wheels off that thang before you set up house, you hear? It will be worth a heck of a lot more!”
Max — I will bet a dollar to a donut (donuts were a nickel when that phrase was current) that it will not continue and that what is about to unfold will dramatically change the thinking and actions of the next couple of generations of young people, relatively to money, spending and debt. Looking at history through a longer lens, though, that is the way it always has been.
I’ve wondered a lot about this: Will this coming housing crash and recession (with stagflation coming back into style) change the attitudes of a generation the way the great depression changed my grandparent’s generation….
or…. Will it have no significant effect on the attitudes of generation Y/Z?. (X too?)
Some things really are different today, and I fear not for the better in this case. Consider marketing and media — everywhere you go , images of people living the good life and the selling of products to fix needs you didn’t know you had having been honed to a science.
Thinking about the role models, communities, and social networks then and now, and I see two very different generations. During the depression, my wife’s grandfather lived in a shack without electricity or running water in the back of someone else’s farmland. The appearance of a bushel of potatoes one fall was a very big deal in his survival.
Would today’s youth feel they were suffering similar hardship if they couldn’t afford a new computer of Mp3 player? I don’t know.
My point is that today we probably consider more things necessities of life than any generation before us. We’re also profiled, risk-assessed, identified, segmented and targeted by marketers and people willing to lend us money to a degree never seen before.
What will it take to make us collectively stand up and say “No. I don’t need to consume so much!” to say.. “I don’t need to borrow against tomorrow to pay for things which will be gone before they are paid for”. What will make it socially acceptable, desirable, and even “cool” for a generation at large to embrace deferred gratification?
What about the “faith” of the current generation? I’m not referring to religion, but confidence in the validity of the path they have chosen in life. How many of our grandparents felt that honest work was the way go get ahead in life vs. how many around us today do we know are scheming to get ahead by gaming the system, by cheating, or other means. How many of us have felt the sting in our heart upon seeing others take shortcuts, or even selling out others and knowing that they are going to ‘get away with it’?
A real change in values for a whole generation implies, at least to me, a wholesale belief that the new values are a better way. Can we really give up all that consumption centered programming to take the easy route and embrace a more disciplined lifestyle?
You can see that I am arguing that it may be harder to change the mindset of generation today if there isn’t a lot of profit in it, but I do see one thing that can make it happen….
… Pain.. and lots of it. Long lingering pain. The kinds that comes from lots of people getting hurt in lots of way. This RE bust and economic shakeout could do that. Maybe.
I’m scared either way.
DeepInTheHeartOf..inciteful post!
I contend that periodic recessions are a good and necessary thing for healthy economies and societies. They are the ‘reminder’ that we need to act responsibly, save some money for a rainy day, and generally keep our priorities in order. Money isn’t everything; friends, family, non-material based happiness matter. Money just helps make things easier.
By adopting a policy of trying to never have another recession, the Federal Reserve has created this idea that the good times are here permanently, therefore we don’t need to be careful with our finances. This has manifested itself through people paying totally insane prices for real estate and then utilizing suicide financing to make the deal. Why worry, things have always been good!
We haven’t had a real recession since the 1981-2 period. That means anyone under 45 hasn’t been through a recession in their adult life…to say nothing about the 20 somethings! Hey, the good times are our right!
yikes…a lot of people are going to be learning some very hard lessons over the next few years, in my opinion, and this will lead to some turbulent political doings.
You have lived though tough times if you have lived in the rustbelt! It is a permanent state of depression! I lived there 25 years and my friends are all still broke! I am 35 and I truly understand hard times which is why I get so angry when I see all this crap out here in LA. These people are so ignorant!! I can’t wait till they lose it all!!
I grew up outside of Detroit during the ’70s and early 80’s. I remember quite well the economic trauma of the time (far moreso than most of my peers). That, and moving to Texas in time to watch the S&L bust, make me wonder how people forget how bad it can get.
Wonderful post, DeepInTheHeartOf! There are many bright & creative young people that have not fallen into the “get something for nothing” mind set. They deeply enjoy the process creating (or fixing) things of real value. They will be among those coming up with and living alternatives (or solutions) to the idea that the more you have, the safer you are. It is also my guess that many of those that read or post on this blog will be happily engaged in helping the young work their way through this mess toward a fiscally prudent and personally rewarding future.
IMHO it will be a depression, and people that have never truly suffered will find themselves struggling for true necessities. “Modern” toys will survive, but the definition of “must haves” will change for decades to come.
What I fear is violence. Most are not nearly as prepared for such conditions as were our predecessors. They’ll be angry and scared and incapable of caring for themselves (witness post-Katrina New Orleans).
great post!
“Would today’s youth feel they were suffering similar hardship if they couldn’t afford a new computer of Mp3 player? I don’t know.”
Those same kids scream their heads off when their mom’s tell them they can’t have that (like it’s the end of the world).
I actually saw a 3 year old persuading her mother to buy, buy, BUY 4th of July decorations the other day.
It was very strange.
But the 475-square-foot condo, priced in the low $200s, will be tough financially
Money aside, it’s very doubtful she’ll enjoy this purchase long-term.
That’s hardly the right way to send down roots; what’s so wrong with renting?
I think she’ll get more dates as a solvent renter from a landlord than she will as an underwater renter from a bank.
From the looks of her budget, she better hope to find a boyfriend who doesn’t want to do anything but sit at home in that tiny place. =) Hope she can afford birth control.
I think she will be looking for a boyfriend who can afford to rescue her from that tiny place.
What happens when these young singles start marrying each other? Suddently the couple owns two 450 square foot condos they cannot unload. Where do they live? Do they squeeze together into one of the 450 feet units while renting the other out at a loss, meanwhile trying to practice very very careful birth control???
“meanwhile trying to practice very very careful birth control???”
There’s a routine 20-minute out-patient surgical procedure available that will effectively take care of that worry. Even covered by some health plans. More people should take advantage of these benefits.
Yes, yes! I agree that we need more eunuchs! Besides, it makes for more easy deals like the one in the Suzanne commercial.
*giggle*
The female version is a mite more complicated — but it’s still only day-surgery. Hurts when you laugh for a week or two, then it’s all good. I recommend it.
Maybe the retarded FBs will do that; but I can’t imagine any person of competent mental capacity choosing an evolutionary dead-end street. Just shoot yourself now.
“She’s considering limiting shopping to one big item a month, and figuring out a low-maintenance hairstyle.”
No worries there…she’ll soon be getting a haircut.
So this passes for financial foresight? OMG.
Low maintenance hairstyle? Best part of the whole article! Maybe if she’d gone with cheaper hairstyles she could have qualified for a 30 year fixed.
Interesting. This is a trend I noticed among my peers before I moved out of California. I had one co-worker (in his 20s) who bought a place knowing he’d need a roommate to comfortably make ends meet. This was in Thousand Oaks, in 2002 or so. And I guess I’d be a datapoint too, given that I bought my current place in Texas when I was 23, although I bought because I couldn’t get what I wanted renting, not because I wanted to pay off a cruise for the rest of my life.
I saw a show on tv a while ago. Grandma Realtwhore had been working on the newlywed grandkids for months to buy an overpriced POS. They finally broke down and went for it. Of all the stupid, callous, uncaring things to do. She saddled the kiddies with over 500k of debt just so she could make a commish. People suck.
These people should all burn in hell!! What comes around goes around! I hate these real estate people!
“Until she bought her condo, Wiggin had extra spending money to travel and meet up with friends for happy hour. She also treated herself to a big vacation every year and took lots of weekend trips.”
“But the mortgage will require her to cut back. She’s considering limiting shopping to one big item a month, and figuring out a low-maintenance hairstyle. She also plans to limit weekend trips and will throw dinner parties at home instead of going out with friends.”
“‘It’s going to be a challenge,’ Wiggin acknowledged. ‘I’ll be paying a lot more, but it’ll be fine. It’ll be a great investment.’”
———————————————————————-
Great! Here we have a 27 year old buying her very first home.
1) Mortgage $700 more per month than her current rent
2) No more happy hour with friends
3) No more big vacation every year
4) No more weekend trips
5) Buying only 1 big item a month
6) LOW MAINTENANCE Hairstyle (what’s this going look like?)
7) Dinner parties at home instead of going out with friends.
She should print this list of sacrifices and hang it on her mirror of her beautiful 475 sq ft home. This way she can be reminded every morning about her great investment.
Wonder how many friends will show up at her dinner parties served with macaroni and cheese?
But hey, she’s a homeowner!!!
sounds like she was living a nice life beforehand.
She can probably only fit a few people in at a time…
Ahh…Mary…You sit in the bean bag chair.
Ahh…Jim…Can stand while I heat up the van camp pork and
beans…When I get back you sit in the corner indian style.
Ahh… Bill Can you go outside…Ill let you back in when I come back with the dixie cups and chinet sectional paper plates.
Sounds like a lot of baggage. Who is going to date her?
She thinks it’s going to be a good investment , thats the sad part .I wonder how long she planned to live in this crackerbox before she moved up the property ladder ,or cashed out for the big prize ? Also I thought sacrifices occurred before you buy a house so you could save for the down payment ?
I don’t know who encouraged this young person to buy a small condo like that , but she will grow out of it .
She is doing this because every one in her surrounding believes that her condo will be worth 20% more in 1 year. Let’s be honest and open about the reasons why these 20-something want to be involved in RE - it is greed and overnight fortune that they are after. They would not be doing this kind of sacrifice if that expected reward were not there.
You nailed it Alex. There is no way anyone would take a cut in lifestyle like that unless they were expecting to get rich quick.
Unfortunately, there was a lot of talk last fall about Seattle appreciating 30-40 % this year and next by that crank NAR economist Lawrence Yun.
Of course, that has not happened, but it scared a lot of people into buying and also kept the greed factor high.
Thought it was funny Mr. Yun didn’t buy property in Seattle last Fall himself- 30-40% is a to- die- for return on your investment !
To be fair, I think a substantial part of it, too, is fear of being “priced out forever!!!!”
Imagine the buyer who considered purchasing in 2002, but thought prices were “out of whack”. So they waited, and in 2003, the same place was 20% higher. Same story in 2004. Then 2005.
When I bought my place back in 2001 I was initially shocked by the high prices and waited for an extra six months, which cost me about another 25,000.
Ever tried to have a dinner party in a 475 sf apartment? Enough room for, oh, maybe 1 guest.
The very definition of “initimate”.
I think some prison cells might be larger?
But remember she’s going to have all this “home equity” to bail her out! Real estate never goes down, it only goes up! She can easily borrow against her place to live the life of her dreams and then flip it in a year or so and make $100k!!
I have to disagree with most of you on this one. It’s a good thing that young people (my age) are willing to sacrifice to make ends meet. I’m sure many of you have complained before about Gen X/Y not wanting to take responsibility, grow up, etc. Housing may not be the smartest avenue to do this in, but it’s a step in the right direction.
I got married fairly young but we both had graduated college, had decent jobs and weren’t looking to have kids anytime soon. We wanted to buy a house, continue to be fiscally responsible, and lay down roots for the future. Unfortuantly, even in 2003, things were way too expensive in south orange county so we were saved that financial nightmare down the line.
The only thing I’m trying to say is that yes, these people are making bad decisions, but it’s not just because of peer pressure or flashy incentives. After college, getting a better paying job than our parents at our age, we’re looking to move the next generation forward. That should mean buying a house, but it’s just not a good idea in this market.
A bad decision is a bad decision.
during some times it’s better to be totally ignorant(and not in) and investment area than it is to be(or think) you’re smart.
the person who wasn’t in stocks and didn’t know what a P/E ratio was in 2000-03 was smarter than the smartest investor who was in, for the most part.
The Hopper: Unfortunately the previous generation (mine, the boomers) has already saddled the Gen X/Y’ers, and their children, and children’s children, with a virtually insurmountable amount of debt.
And it continues, as Ms Wiggin gets fleeced on a $200K, 475 sq ft condo. The condo developer, probably a baby boomer, laughs all the way to the bank with $200K, and stands aside while the bag holders (the bond holders) and Ms Wiggns argue over where all the money went. The stupendous debt of the US govt is being passed on as well to your generation.
An incredibly sad state of affairs, where the boomers mortgage their children’s future, but that’s what has happened. It is going to cause a huge amount for pain for decades to come.
Peer pressure isn’t limited to the 20 somethings and early 30s. The only difference is for older impressionables with insecurities it is called “keeping up with the Joneses.” The money I see some of my contemporaries spending on Carribean vacations could if invested wisely buy the Carribean in 20 years.
It’s easy to underestimate the pressure to “keep up”. (See my post above for related rantings).
I’ve had the interesting experience of “being the joneses” for some of my peers, and wonder if others here have noticed themselves in that same position.
I was thinking of one incident a couple years ago when we were buying our current home. To make a really long story short – due to circumstances not exactly planned for (problems with pregnancy, logistics), for a while we had 2 homes and 4 nice cars because I didn’t have the bandwidth dispose of the excess items for a while (there wasn’t a pressing financial need, so it got dropped down the priority list while keeping my wife from having a stroke and losing the baby went to the top).
A co-worker of mine in his late 20’s just couldn’t get over “2 houses and 4 cars” and kept brining it up in conversation, usually with a spat of resentment or jealousy in his voice. I’d point out again and again that our circumstances were very different – I was older, much more established, and that the “quantity” was temporary until I could sell the old house and car. He was a very smart engineer, but he couldn’t get past his own hang-ups on working with someone who “had more”. Eventually I gave up trying to get him to not see it as somehow making him less of person or that he was in a different phase of life. Nothing I said could change his perspective. Last I heard he went and bought a big 5-bedroom house in Plano which is sucking all of his paycheck.
Yeah, I’ve been on both sides. Everyone I know now has a million dollar house but not all of them have million dollar homes. There’s a difference but not everyone understands that part. I don’t see Gen X/Y learning anything except through painful experience. THey’ve never known recession and there’s a doozy on the doorstep ringing the bell. They think a downturn means a 3 series instead of a 5 series. Truth is someone else will own that 5 series they almost paid off but couldn’t. Instead they’ll be driving a beater and paying usurious rates for the privledge because they’ll have ruined credit. Then the meaning of stagflation will be learned. With no assets or investments to speak of they’ll have flat wages and pay more every month for the basics. That’s going to be the hardest divergence for them to endure. There’s going to be massive inflation in the things they need and deflation in the things they want. Watching home prices slide but having to spend part of the deposit they scraped togeter for a new transmission is going to hurt. It isn’t their fault but the timing sucks. The age of a comfortable and large middle class is coming to an end. We are going back to rich and poor and by simple math most people are going to slip into poor and a very few will manage to achieve wealth. There’s just some things only the school of hard knocks can teach. I’m a very successful real estate investor. I don’t invest in my personal homes, those are where we live, an expense. I currently have no investment properties having sold the last this spring. That’s why I’m successful, I’m out. I’ll be back in again when rents get back to 140 multiples. This last sale was renting at a 273 multiple. [n.b. the usual investment multiple is 100-120 but in California demand, property taxes and income taxes and deductibility of certain expenses justify higher prices.] 140x will arrive with a combination of price declines, rent increases and inflation erosion. I know this stuff because I paid to learn it. But I cannot give it away to a Gen X/Y er because all they see is the results and now they think it is their turn. Your example above.
You nailed it more than you know. Ironically, all 4 cars were 5 series, and that really drove him nuts. He wanted one badly, yet bought a Maxima (limit of credit I guess). Lest you think incorrectly of me, I’ll note that I’ve paid cash for every car I’ve ever bought, and I like to buy lighlty used bargains and keep up for 150-200k+.
I think we could easily spend an evening discussing what is happening to the middle class - I also see it shrinking significantly, and its alrady happening in ways that aren’t that obvious to most.
Your comment about inflation of necessities/deflation of luxuries is interesting and agrees with my own projections. You’ve been a big contributior to these forums — more so than my own touchy-feely musings. I’l love to pick your brain about your thoughts and experiences given the opprotunity.
Good luck to him if he ever has to sell it!! It took me 2 years and $50k to get rid of my house in Plano due to a job relocation to LA. Pure stupidity!!
As a young adult in not-quite-bubble-land, I’d have to say that the article is right on even where I live. I could tell you stories and stories about friends “building equity”, “investing”, etc. just by buying a house for a fair amount more than rent costs. And with no money down and grants available, why not get in while rates are low and appreciation is 10% and your income is still low enough to qualify for free money? The concept of saving money and maybe getting in by the time you’re 30 is long gone. Those who bought invariably talk about how poor they are now. But hey, Real Deal is right.. we’re homeowners, who cares! Are all those sacrifices worth it just to have your own place? Wow. While they’re dropping $500/mo in interest, I’ll throw away my $250/mo in rent and pay off student loans then save like crazy, thanks.
Nothing personal, just general comments. There’s a good possibility that everyplace may be bubble place because loose financing was everywhere. Second, there might not be equity or investment returns for a very ling time, your friends might just be emulating their boomer parents rather than pursuing a strategy best for them. Third, you bring up an interesting point. It seems that a great many of younger adults are saying one thing and planning another. For some reason there is a disconnect. They hear “price declines and an end to speculation” and instead of thanking the stars for a rational housing market where they can live in the comfort they have earned they imagine an opportunity to buy low and sell high and take their turn at the gambling table.
Let me make this clear; until speculation is removed there will be no rational housing market. That means “this is a nice place to live and I can afford it” not “the price is so low we cannot lose.”
You’re right that every place could be bubbly, just pointing out that we haven’t seen 2x or more increases in the last five years. And yes, they’re just emulating their parents in buying homes because they’ve been told it’s a good “investment” that everyone should do as soon as they can. They are buying them to live in, but still stretching more than they should. Price declines are not considered. Finally, where do you get your third point? Most of the people I speak of just assume RE goes up, so might as well buy. They’re not in deep trouble, unless big declines hit and they need to move (unlikely, but possible). I will buy when the rent/buy equation works out for me, or just when I can afford a place I want. Speculation is not a consideration for me, whether trying to time the bottom or the top.
They’re not in deep trouble, unless big declines hit and they need to move (unlikely, but possible).
74% of the people who bought in San Diego last year had adjustable mortgages or worse (I/O, NegAm, intro rates, etc). Even historically high appreciation, 5-7% won’t save these people from the mathematical certainty of being unable to afford a lifestyle that includes the houses they’ve bought. They bought on margin, they bought something illiquid, they bought an investment with massive load fees, they paid a large entry fee and need to pay a large exit fee. Doesn’t require asset price declines to short squeeze these people. With these financial instuments they cannot hold onto these houses regardless of price changes.
You sound like you’ve got the right ideas but remember, you are playing on a field with a lot of amateurs who are going to hurt you no matter how skilled you are personally. If you get in at this point, no matter what your individual reasons their speculating means you are speculating.
I have been reading these posts for months now and putting in a comment now and then . I completly agree that a residential RE bust is happening. Buying low is great, however Real Estate wealth aquistion is about potential which is not always price. It is about planning your work and working your plan as opposed to getting comfortable in a house when prices are wherever they are.The idea that an improved property is depreciating asset makes no sense to me even if technically it is correct. The attitude is way to passive for me. If anyone owns real estate and it is a guaranteed depreciating asset is because they bought a house not and opportunity that can be turned into cash flow or a rent/mortgage free place to sleep, raise a family ect., over time, by exercising business skill and or hard work that make the investment perform. That is what is great about Real Estate, unlike other investments I can control how it performs to a degree. I can not compete acedemically about economics. I do enjoy the knowlege that you guys and gals contibute. Paticipating in this forum is like getting convenient and free catch-up tutoring!
Hopefully the merited negativity toward Real Estate as an industry will not cloud anyone’s ability to understand how to benfit honestly through property aquisition including a primary residence when the time is right. I hope when the time is right that first time buyers will buy less than they can afford and save some buying power to move into owning rentals or improvable land. If parity is reached between rents and mortgages, as most of us agree should occur, this type of venture should be possible again.
Belch.
Wow.
You sound like a brainwashed idiot.
Irrational.
Do they really, really make idiots (GREATER FOOLS) than this? Didn’t someone on her side do the real calculations to see what the real payment will be after the IO or NegAm period resets (and it will be a lot higher than $700)? Did she picture herself trying to live in that POS with a husband and a couple of kids? Maybe this bubble will last a little longer with a number of fools like this chick. Only, now maybe they will require more than a pulse and a breath to get a $500K loan. Maybe they will actually see if someone has a snowballs chance in hell of paying it off? But, FAT CHANCE.
This is tragic. These young people are trying to be responsible. They are willing to accept responsibility, defer gratification, and make sacrifices for the future. These things are commendable.
And the (Boomer, FWIW) real estate agents and mortgage brokers are preying on them. They are selling these naive young people overpriced real estate and taking them into suicide loans.
These young people are hard working and maure. They certainly are not out doing drugs, clubbing every night, or just sort of coasting through life without giving any thought to the future. They are thinking ahead.
A young associate who recently joined my law firm fresh out of school was talking about buying a place a few months ago. He was looking at a duplex in a god-awful, crack-infested ghetto. Seriously, that’s where it was — in a high crime area. (Echo Park in LA) He planned to get roomates to help him cover the mortgage. I did my best to gently dissuade him, but haven’t talked to him about housing lately, so I don’t know whether he eventually bought a place or not.
The marketers and the RE industry are preying on these young people. It’s just terrible. The older vultures who are doing this should be ashamed of themselves. It is despicable.
Joe,
With all due respect, because I agree with your premise 100%, I don’t think it’s just boomers that are doing it to the younger generation. It is about greed, and everyone doing it to everyone else. It is not limited to older vultures.
And the (Boomer, FWIW) real estate agents and mortgage brokers are preying on them. They are selling these naive young people overpriced real estate and taking them into suicide loans.
So there are not just as many real estate agents and mortgage brokers born after 1965 (or whatever the latest date to determine boomership is) as before?
I would think there were more!
I know what you mean. I met an older realtor and overheard her talking to a young couple about getting into real estate. She said “Oh yeah, buy a condo now and later you will afford your dream house”. I couldn’t believe it. She didn’t say MAYBE you could afford your dream house but WHEN. The young couple was smart but naive. I pulled them aside and told them all know…all indicators say that real estate is on the way down, every asset class goes thru cycles, that they could be negative equity of tens of thousands of dollars if they did what this lady suggested. I truly wish I said these thing IN FRONT of her to embarrass her for her brazen, greedy attitude. The more I think about it the more reprehensible it is to me. She didn’t give ANY indication that this first purchase may have risks. What terrible, terrible karma. She didn’t think at all that she maybe ruining the financial lives of these young people.
Later, when I told her I lost my mother, she said “throughout the centuries daughters have lost mothers”. Duh, I know this but it still hurts and changes a persons life forever. When she made that comment I KNEW she was inconsiderate and thoughtless. Figures.
Yup. I hear it on the talk radio shows in my area, and see the same thing. Everyone has the idea that no matter what, real estate goes up. Our local paper printed an article which mentioned the bubble, and this lady said that buying a condo during the bubble is still okay, because the bubble would slow appreciation down to 10% a year…
A friend’s coworker was about to sign a loan and noticed the lender had slipped in a page about the huge balloon payment that was never, once, mentioned. The guy was encoraging this young buyer to sign the “standard” paperwork. My friend said his coworker got really stressed out over it, and several fronts. First, the fact that he ended up not buying the house he wanted. Second, the fact that he almost signed into an agreement that would have led to major financial problems in 3 years or what have you, and third that he was lied to and led into such bad financial advice by a “professional.”
We are going to see lawsuits flying…. I’m still seeing tons of spam email about mortgages.
This is the place they can find GF’s. THat is why they are preying on them
WTF is GF, FGS, N2LCA???
Greater Fools
It is tragic that twentysomethings are drinking the koolaid and jumping into this market. They will regret it. But people tend to forget the elephant in the room reason for buying vs. renting. The tax situation is attrocious for those starting out with decent paying jobs and no deductions. If they are fortunate to be living with the parents that is one thing. Their reduced monthly nut cancels out the tax disadvantages. If they are unfortunate enough to have to rent they can easily find themselves paying northwards of 60% in federal/state/local taxes/fees etc. while still filing a 1040EZ form. And it is one heck of a trap to climb out of. I know first hand. I was making more $$$ than darn near everyone I knew and watched as they all jumped straight from mom and dad’s basement into three bedroom houses of their own while I was stuck in an apartment for another decade. There is a reason why so many kids live with their parents through their twenties and now into their thirties. Those kids aren’t stupid. They are saving real $$$ and building one heck of a nest egg for their future. God help the poor schmucks who have nothing left after paying their rent and taxes.
Where on earth are people payin 60% tax? I make a good salary with few deductions, and I rent. My overall tax came to around 30% last year.
Where do you live? Fed, State and Local = 30%. Ha!
Good salary must be 40k in Texas where there’s no state income tax.
I make quite more than 40k I assure you, in Washington — no state income tax. Anyone living wth 60% tax is nuts.
To clarify, the 30% i stated above was in income tax. I didn’t count sales tax, so that’s another 7% or so if you want to add that in. Other taxes (gas, phone, etc) are negligible and honestly are figured into the cost of whatever I’m buying. There’s no point breaking it down to that level IMO any more than saying I pay some percent of my salary in shipping or labor.
$42,000 gross. $25,000 take home pay (Fed and State). A 40.5% bite right out of the gate. Now add in property taxes paid through rent. Telephone tax. Gas tax. City sticker. License sticker. Blah blah blah. I didn’t say I paid 60% income tax. I paid 60% total tax/fees fed/state/local. Which means: $42,000 gross income ending up with somewhere in the neighborhood of $323 a week to actually live on. No deductions = f@cked.
Deductions don’t affect local/gas/sales tax etc. Anyway, I suppose if you’re bothering to figure in property tax on the rental place and such it would be higher, but unless you’re paying your landlord’s taxes, you’re not actually paying the tax. I’m sure he bases the rent to some degree on how much he pays in taxes, but you can take that to the Nth degree. I pay for food, so on top of the sales tax there’s the tax the people that sold me the food pay, and they pass that on to me, so that’s more tax, etc. I don’t see that as a productive calculation. Sales tax sure, but you can get to 100% tax if you want to carry it far enough.
I’ve never had many deductions, even when I was much younger making a lot less and never paid close to that much. I purposely chose a cheaper place to live when I decided to move here. Your mileage may vary.
” I suppose if you’re bothering to figure in property tax on the rental place and such it would be higher, but unless you’re paying your landlord’s taxes, you’re not actually paying the tax.”
I take it that finance wasn’t your major in college?! The consumer (renter) pays ALL taxes ultimately. The landlord that eats the property taxes and only passes along the mortgage costs to his or her tenants very soon becomes an ex-landord when foreclosed upon.
Get real.
I am in the 25% tax BRACKET, but my actual federal income taxes paid (as a proportion of gross) was in the neighborhood of 11%. No, I don’t get any mortgage deduction.
BTW, I sincerely hope that someone with a degree in finance has enough wits about him to find a higher paying job than 42k/year. I am a teacher, for crying out loud, and I gross nearly 60k. A TEACHER.
Gee, a TEACHER! No wonder you you are clueless. Try $42,000 in 1992 just out of college. Fourteen years later I make a bit more. Make that a lot more…than you. Those that can’t…teach, and then leave insufferably inane financially ridiculous comments on housing blogs. But cheer up! After school vouchers are passed I am sure you can find a new job in either the food service or housekeeping industries.
To equally compare the tax deduction: 1) only use the deductable taxes (state, federal, and local property taxes); 2) figure your total rate based on the index (you only pay the higher rates on a portion of your income above the threshold); 3) compare taxes as a portion of rent only in markets where rent = cost of homeownership. Otherwise, let the landlord pay the taxes and the other ownership expenses.
475 square feet will cost you $500,000 in NYC. And it is, of course, still a rip off.
-X
BubbleTrack.blogspot.com
Friends daughter was pressured into buying a new home in Loveland, Colorado last summer. She was just fresh out of college, had a nice apartment, great job, and a new car. She said life was good. Parents told her she needed to buy a house before she got priced out forever. She bought a home in a new sub d with no money down, option arm. Everything was good until she came home one day and noticed the sub d sales sign was changed to show a $10k reduction in price for her model home. Hello, instant $10k loss. That wasn’t bad enough. The homeowners assn fees increased by 100% because the developer had not funded it properly. Now the ARM is set to adjust. She’s up to her eyeballs in debt for window coverings, furniture…etc., but is willing to sell at the $10k loss if she needs to. Talk about being carefree.
[i]“Until she bought her condo, Wiggin had extra spending money to travel and meet up with friends for happy hour. She also treated herself to a big vacation every year and took lots of weekend trips.”[/i]
This describes almost all of my friends living on the West coast to a T. They can’t afford to do anything or go anywhere, but they’ still think their quality of life is superior to that of people in flyover areas. Even the ones who rent are struggling. One of my best frinds was just forced out of her LA apartment because the owner wants to do a conversion. She had to move into a smaller place that costs $500 more per month. None of these people have any savings. I feel like the people who are making smart financial decisions will probably end up subsidizing the FBs for decades.
This is great! Pay monthly check to to baby boomer (social security)…. Pay medical costs of baby boomer (medicare)…Now, buy overpriced first home from baby boomer!! Looking forward to a lifetime of indentured servitude?
Is that you, Surfer-x?
That’s funny! LOL! I rememer Surfer-x from Patrick’s site. For those of you who don’t know who we are refering to…he’s a real pistol. LOL!
BayQT~
My two cents from the bits bucket:
I know there was a somewhat heated exchange on this blog recently regarding the generations, but I have to say. I’m from Phoenix, on the gen X/Y border, and my baby-boomer parents, my parents’ friends, and my friends’ parents ALL spew the crap about buy, buy now, don’t throw your money away, great investment, never goes down. They have brainwashed their children into believing this, which they do because they were EIGHT YEARS OLD during the last downturn in RE. Not really an age that pays attention the the real estate market. Our parents were 35 during the last downturn, but they still don’t remember it. They have been hypnotised by the amount of money they have “made” in the past few years, and have completely blocked out the previous decade. I only recently found out there was a bust here in the valley in the early nineties, and it bewildered me because all these 40 and 50 somethings have been mouthing off for years about “always buy, never rent”, and they are old enough to remember the last bust! At least these young people have an excuse for their ignorance on RE, they’ve never seen any different.
I agree with you rzero. I am a Phoenix genxer too but I sold my home last August. Many, many young folks will be financially destroyed by this bubble, simply because they just bought and will have huge debt loads. My friends think I’m crazy when I tell them that buying RE now is probably a bad idea. I don’t blame any generation because most Americans, regardless of age, are fiscally clueless!!
Have you considered the possibility that they do remember the last bust, and have seen that in just a few years real estate made up all its losses and then kept on soaring to its current, previously unimaginable heights? What many people have learned is that as long as you don’t panic into or are forced into selling during temporary downturns, owning real estate is a surefire path to riches. Of course as one who has believed housing will crash since long before I encountered this blog about a year ago, I don’t agree with that. But it doesn’t surprise me. And innumerable economic commentators, including a number of reknowned economists, have opined that the worst that can happen is that prices stagnate for a few years — or even that the worst case will be a slowing of annual price increases to single-digit rates.
Few people have noticed or thought through the implications of the opening topic of this thread — the fact that record-high percentages of the younger population cohorts have become home-owners, and are no longer available as first-time buyers to allow current owners to sell and move up. I expect this to be a major factor in poisoning the market — the sad experiences of these young people will convince those of their friends who haven’t yet bought to hold off even longer, while those who are wiped out by their losses also won’t be re-entering the market for a long time.
The fact that the home ownership rate is now at nearly 69%, rather than around 64% where it held steady for decades, means that there are now about 4 million homeowners who wouldn’t have become homeowners in any earlier era. If the ownership rate is going to drop back to its historical 64% level, a lot of people are going to lose their homes.
“‘There seems to be a lot more peer pressure, more parental pressure to buy at a younger age,’ said Warren Ballard, (who) sells new condos and conversions. ‘The attitude really has changed.’”
Ouch! That is a big mistake by today’s parents! When I bought at the top of the last bubble in 1990 at age 31, my parents were actually kind of upset and my dad said I have a few more days to back out of the purchase agreement if I want, legally. I was stubborn. 6 years later I sold for a 20% loss. Why are parents these days giving their adult children bad advice?
I think the MSM has played a huge role in the brainwashing. People see stories and pictures of people living large every day and it is forcing everyone to try and get their piece of the action. It also leads to massive corruption, which we have seen in the last 10 years or so.
Americans need to learn a lesson.
Yeah, I see a time real soon we return to the simpler pleasures. Which is good, and healthy, as we seem to be drunk with liquidity right now. Time to return to things like love and friendship rather than things which can be bought.
I’m probably just too tired, but what does MSM refer to?
I think msm is main stream media.
Regardless of age ,everyone wanted in on the appreciation I think .
They just did another Flip That House show where a young girl flipped a condo ,went 50 % over budget ,and came out with a 60K profit . At the end , it showed the parents being so proud of the daughters flip . No question that these programs influence people .
All the commercials on that show are real estate related ,so I’m sure that explains why it always ends up being a positive money making flip in the end in spite of the drama .
When and where was that?? Somehow I suspect that must have been in 04 or 05 sometime…it sure as hell would not have been possible in the last several months in So Cal.
The episodes of “Flip This House”, “Flip That House”, “Buy Me”, and “Property Ladder” that will be filmed in the second half of 2006 should be a lot more ‘exciting’.
I watched that episode. The condo was in Long Beach. The air date for the episdoe was 2006, but it seemed like it was filmed in 2005.
I spent a year living with a friend who was then 23 and bought his first condo due to peer pressure from his mother. His PITI + utility costs were so high that he could barely afford it until I began renting his second bedroom. The trouble is I was spending every night out at the bars because I hated sitting in that bedroom every night and he never went out because he couldn’t afford it. I then noticed my rent going to pay for his new car so I decided that instead of helping a friend out I was going to get back out on my own, which I thankfully did.
I don’t feel any parental pressure to buy because I’m 1500 miles away from my parents (I do feel pressure to come home) but the peer pressure is very high. I hear all of the traditonal lines but no one understands my situation better than I do; I prefer to be able to take a 4 day trip each month, drive a paid off nice car, and tell my boss to take a hike if I want to tomorrow. I’m not building equity but at this point in the game I don’t feel that I’m missing out.
I am missing something here. She is going to buy a 475 sq foot studio condo in Ballard and pay $700/month more than she currently pays in rent… You can rent a one-bedroom apartment in Ballard for $700/month…
So, if you add in random miscellaneous expenses, her payments will more than double when she moves into a smaller space.
Right now, Ballard is about the only “hot” neighborhood left in Seattle.
For the past year or so, it has been pushed by press and RE agents as the hippest/coolest place to be.
Probably because it was a bit cheaper than the already over the top in price areas in “desirable” North Seattle. In other words, it was the only place left where prices had not been driven through the roof (only up to the rafters!).
If you go on Zip, it is the only place in Seattle that shows up as under 20% price reduced. Currently that zip (98107) is only 10% reduced whereas the rest of Seattle neighborhoods are between 20 - 50 % reduced.
The machine has done an awesome job promoting Ballard. And there are tons of new condos, townhouses in the midst of constuction. So they need to keep it up a while longer.
And when you see the ads in the Sunday papers for these places, it is obvious they are targeting 20 year olds, not boomers (”She only wants me for my condo”, cool guys on motorcycles pulling up in front of swank buildings, etc.).
It’s pretty sick but there you have it. Robbing the young. But we’ve known for years now that these people who have promoted the boom have no ethics. Too bad too many 20 year olds are not hip to that fact. They are the last suckers left to be bled dry.
Here’s another reason they need to target 20- somethings if these condos are going to get sold: even specuvestors in Seattle are beginning to concede that Seattle RE could depreciate.
A couple days ago our “Seattle RE Investor” Eric, on his blog made posts he thinks it could go down 10%.
When the specuvestors get out, who’s left? Ignorant, impressionable 25 year olds.
And, she reasons, she would never save the extra $700 a month that will go to the mortgage, anyway.
Did anybody catch this quote?
Somebody needs to start a nonprofit organization “Pre-Homeowners Association of America” or something, and specialize in hooking up renters with savings accounts and teaching them to make “pretend” mortgage payments into aforementioned savings accounts.
Optioned Unarmed - won’t happen. It is too good of an idea, and would actually make sense. would go contrary to this nutfarm
There ought to be a law. Nobody under 24 can have kids and nobody without $100K to throw away can be a home owner near either coast. We’d have a much better country.
It would be interesting to see a geographic breakdown of where young people are buying. In my hometown in Upstate NY a lot of my friends (in their mid-20’s) have homes. They took advantage of today’s crazy financing to get good homes for $100K or so. But my coworkers (in the Boston area) around my age, NONE of them own their own homes. So I wouldn’t be surprised if the bulk of young buyers are in minimally bubbly areas.
The confidence of youth to buy overpriced RE may be linked to the “self-esteem” that has been drummed into Gen-X and Gen-Y since Kindergarten.
Your are a winner (everyone is a winner)
You deserve it.
Success is guaranteed if you try your best (it isn’t)
Opportunity abounds.
They grew up with grade inflation, sporting events where you get an award just for participating.
There may be a fair amount of false confidence and feelings of entitlement that helps convince a twentysomething to sign the suicide loan docs.
“They grew up with grade inflation, sporting events where you get an award just for participating.”
Those are products of wimpiness, which has infected Americans of all ages since the late 60s. To avoid a political war, I will leave it for others to guess which side of the political fence (liberalism vs genuine conservatism) “wimpiness” lies on.
Why don’t you compare genuine liberalism and genuine conservatism, i.e. our founding fathers vs. the right-wingers of the French Revolution.
That’s because Bill learned everything he ‘knows’ from Rush Limbaugh.
“Right now, Ballard is about the only “hot” neighborhood left in Seattle.”
Ballard - eeeyuck. Flat, boring, ugly part of Seattle. Only “hot” because it’s cheaper than Queen Anne and nicer areas. Ballard might have had more potential, if they hadn’t stupidly killed the monorail…
I don’t get why she needs to buy a 475 sq. ft. condo in Ballard for that price. When I lived in Seattle a few years back, there were tons of empty condos downtown…it seemed like the condo bubble was already busting there from what I could tell.
Ha! That’s true Stephanie! Downtown condos have already boomed and busted once in the past 10 years.
A friend of mine bought at the top @ 2001 in Belltown. Don’t think his place is worth what he paid for it then even NOW.
Another friend rented a Belltown condo at a screaming deal a few years back because there were so many “extras”.
Now there’s a ton more coming on the market. But between then and now there’s been a huge campaign about condo living. We’ll see what happens.