patrick.net

http://finance.fortune.cnn.com/2012/11/27/first-time-homebuyers-housing-market/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+(Top+Stories)

Where have they gone?

In October, the share of buyers purchasing their first home dropped to 34.7%, the lowest point in at least three years, according to a survey of real estate agents. This compares with 37.1% in June and the 40% range it has historically hovered around.

Goran, it depends on the region.

In coastal CA, they can sell to wealthy immigrants, flippers and plenty of the BB's kids that DO have high paying jobs. If housing inventories stay super low, then there will be enough people with money to pay the silly premiums that are now being commanded. Not ALL of the BB's kids are broke and living in the basement. In fact, a lot of the high-earning ones happen to live in coastal CA. With super low inventories, you don't need hordes of monied people, anyway.

As for the rest of the country, well, there is probably more reason for concern on this front. The Baby Boom was ~20 years long though, so there is about that much time for them to unload their properties, too. Per the US census, there are 77.3 million BBs. If they, nominally, have one house that they are going to sell over the next 20 years, that is ~3.9M houses per year, which would approximately double the current sales volume. The BBs are just starting to hit retirement age, and it will probably be delayed for many of them. Assuming sales volumes remain about how they are today, plus the BB's houses, we might get back to historically normal volumes. I am not expecting a flood of houses to come crashing prices down, personally.

bmwman91 says

The BBs are just starting to hit retirement age, and it will probably be delayed for many of them.

Yes, 60% of boobers believe they will work into their 70s, as sadistic as that sounds.

bmwman91 says

If they, nominally, have one house that they are going to sell over the next 20 years, that is ~3.9M houses per year, which would approximately double the current sales volume.

That's my point. Either the boomers continue working into their golden years, or they unload their homes and downsize so they can actually not die in the office.

I know what option I'd choose.

Not saying the extra volume will crash the market, but who knows.

Then I guess everything is alright then.

Sorry Goran, the bad guys won. (bad guys being the fed/Wall Street/government/RE industry). House prices will remain high in the areas we live. There is hardly anything available to downsize to, especially since the cheaper RE market is being consumed by investors & insiders. The lower end stuff will reappear on the market sometimes, but it has been flipped and probably has an asking price that is not enough less than the BBs current house to be attractive. With so many BBs under water, they will be living there and paying it off forever anyway.

Options for first time house buyers like us are limited to a) take it in the ass and overpay, or b) move far away. Accept it. Life is a little more tolerable once you do. Waiting for a train that never comes really sucks the life out of you. Call me a quitter, but I gave up on a free market.

bmwman91 says

Options for first time house buyers like us are limited to a) take it in the ass and overpay, or b) move far away. Accept it. Life is a little more tolerable once you do. Waiting for a train that never comes really sucks the life out of you. Call me a quitter, but I gave up on a free market.

It is frustrating that our government wants to increase the debt load of its citizens just to satisfy their banking buddies, but it's not sustainable.

I'm not waiting for it to fail. I know it will fail and continue to live life. It failed before. Why wouldn't it fail this time?

Did the cheap no-doc free money loans work?
Did the $8,000 tax credit work?
Did HAMP/QE1/QE2 work?

No, none of those things worked. Why would cheap money work this time around? Why would QE work this time around?

The only thing that is surprising is that Obama/Bernanke think their strategy will work.

Something tells me the Boomers will be less concerned about the Boomers, than the Liberal petty collective is.

I think once your at the point you can audibly pass gas in company, and remain expressionless, what happens to your house is the least thing on your mind.

I doubt if Mattlock is on their minds.

They'll either live in their homes, they've created for them selves while they can or die, or will be put in old folks homes by their greedy kids, that despise the Boomers anyhow.

So the real question is, who will these greedy bastard kids of boomers sell their mom and dads life work to?

CaptainShuddup says

So the real question is, who will these greedy bastard kids of boomers sell their mom and dads life work to?

To their less fortunate greedy bastard friends?

Goran_K says

To their less fortunate greedy bastard friends?

Glad I could help.

Goran_K says

bmwman91 says

If they, nominally, have one house that they are going to sell over the next 20 years, that is ~3.9M houses per year, which would approximately double the current sales volume.

That's my point. Either the boomers continue working into their golden years, or they unload their homes and downsize so they can actually not die in the office.

I know what option I'd choose.

Not saying the extra volume will crash the market, but who knows.

I suspect many of them have paid off their homes. Given the choice between paying only maintenance & taxes vs selling and renting, many will probably choose the former.

In CA, Prop 13 will encourage many to stay and pass on the homes to their kids. Who knows what the kids may do with the homes, but either way it'll either give them a place to stay for cheap or they'll have enough $$$ to finance a home-purchase of their choosing.

That's assuming their kids want to live in the home, or even stay in the area.

Goran_K says

That's assuming their kids want to live in the home, or even stay in the area.

Like I said, even if the kids sell the homes, they'll have enough $$$ to buy another one somewhere else.

I think we're already seeing some of the effects of it now with the large amounts of cash purchases. Not all are investors, many are kids spending their parents/grandparent's money. Price/Income ratio will never tell the whole story when there's a Wealth component lurking.

bmwman91 says

the bad guys won

No truer words were ever spoken. The bad guys won, made tons of money, and have it in reserves. Corporate profits are up, and banks have more money then they know what to do with so they speculate.

Those sweet heart deals of residential housing selling to investor groups are at $150K per unit on average down from a median price of $226K on avergae nation wide.

The longer the can gets kicked down the road the more income the banks, speculators, and investors make. It's just another little cog in a bigger wheel of cash returns for cash.

So, you can wait until the cows come home for residential home prices to come down.

There will always be buyers, and if you look at the stats the buyer pool is small, and affluent, a lot of you people are probably affluent, you don't want to buy because of the price, or the fact prices are going down.

The only way to win is to get rid of the debt. The student loans have to be the biggest banking scam in history, but I don't really know that. Credit cards should be outlawed. Mortgages should be paid off.

If you buy a house you should figure on paying it off. Where's the problem with that?

You don't want to hear about it, but buy a cheap property, pay it off, fix it, sell it, and move on to the next one.

A family used to move an average of three times to get into a dream home, today that want that Dream, today.

Nobody wants to work any more. Nobody wants to work the angles, everybody thinks magic will happen.

David Losh says

Nobody wants to work any more. Nobody wants to work the angles, everybody thinks magic will happen.

FHA, HAMP, Welfare socialism etc.

Henry Ford built his company with $700,000 (inflation adjusted).

Elon Musk can't even reach profitability with $500,000,000 from the government.

This country is doomed if we don't stop being lazy.

zesta says

Like I said, even if the kids sell the homes, they'll have enough $$$ to buy another one somewhere else.

That's assuming the homes are paid off free and clear, or have any amount of equity at all. Boomers aren't known as the frugal generation.

No one is going to buy anything with an anchor.

Goran_K says

Who will the boomers sell their homes to?

Why sell? I didn't know BB have no kids.

Do you know what the average boomer retirement account looks like?

To retire, most boomers will need to sell, and that's assuming they have equity. Many boomers will probably work into their mid-70s, and die in the office if they can't profit from a sale.

Goran_K says

That's assuming their kids want to live in the home, or even stay in the area.

I know a got in mill valley doing that. Pays $350/year property tax (1965 tax rate) and can't afford to move. Thank you Prop 13.

pdg says

I know a got in mill valley doing that. Pays $350/year property tax (1965 tax rate) and can't afford to move. Thank you Prop 13.

Cool, and you SFace have solved the problem.

Goran_K says

That's assuming the homes are paid off free and clear, or have any amount of equity at all. Boomers aren't known as the frugal generation.

No one is going to buy anything with an anchor.

You're right, not all BB homes' are free and clear.

I'd assume that of the % of homes that are free and clear, a large percentage of those are held by boomers.

I'd also assume that of the % of homes that are underwater, only a minority of those are held by boomers.

I'm sure the actual numbers are probably out there somewhere, but those are two safe assumptions.

Goran_K says

t is frustrating that our government wants to increase the debt load of its citizens just to satisfy their banking buddies, but it's not sustainable.

Not just banks, what is at risk in mass default is everyone's "savings". Banks didn't loan out their own money, they loaned out their depositors'.

pdg says

I know a got in mill valley doing that. Pays $350/year property tax (1965 tax rate) and can't afford to move. Thank you Prop 13.

Prop 90 fixes that.

Alameda, El Dorado, Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura

are the counties you can downsize to (without losing the protected Prop 13 valuation) if you live in Marin County.

zesta says

I'm sure the actual numbers are probably out there somewhere, but those are two safe assumptions.

Hmm. There is where we disagree.

The latest census data estimates the boomer population at approx. 72,000,000.

About 26,000,000 homes are owned "free and clear" in the country across all age groups. Your assumptions don't seem like very safe assumptions at all

Also:

The Center for Economic and Policy Research in Washington released a report which estimates that 30 percent of homeowners aged 45 to 54 are “under water” on their mortgage. (About 15 percent of older baby boomers, 55 to 64, fell into that category as well.) Other interesting notes from the report:

Baby Boomers in the 45-to-54 group saw their overall net worth plummet by about 45 percent over the last five years, to a median level of $94,200 from $172,400.
Five years ago, the median baby boomer household, with people aged 45 to 54, had enough net assets to generate about $14,000 in annual interest once the homeowners reached age 65. Now, that figure is just under $8,000.

The more likely scenario is:
- A small to moderate percentage of boomers own their homes free and clear.
- A moderate percentage owe money on their home still.
- 30% or more of them are underwater according to the recent data.

Of the 72M Boomers, how many are married? How many rent, how many own homes, how many live with their children? Tough to correlate 72M boomers and the 26M homes that are free and clear.

Doing a quick google search for "boomers underwater" takes me here:
http://www.aarp.org/content/dam/aarp/research/public_policy_institute/cons_prot/2012/nightmare-on-main-street-AARP-ppi-cons-prot.pdf

http://blog.mortgage101.com/2012/07/30/baby-boomers-facing-foreclosure-at-higher-rate/

There it says 3.5M baby boomers are underwater. If there are 72M boomers than 4% doesn't seem like very many to me.

zesta says

Of the 72M Boomers, how many are married? How many rent, how many own homes, how many live with their children? Tough to correlate 72M boomers and the 26M homes that are free and clear.

Doing a quick google search for "boomers underwater" takes me here:
http://www.aarp.org/content/dam/aarp/research/public_policy_institute/cons_prot/2012/nightmare-on-main-street-AARP-ppi-cons-prot.pdf

There it says 3.5M baby boomers are underwater. If there are 72M boomers than 4% doesn't seem like very many to me.

Did you even read the study you quoted? Your assumption is again wrong, and suspect because you didn't even take time to read the study YOU found, instead just posting haphazardly, and making an assumption to fit your agenda. That's ridiculous.

From page 3 of your study:

As of December 2011, 16 percent of borrowers age 50+ were underwater on their mortgage loans, meaning the amount owed on the mortgage loan is greater than the value of the property.

The figures I found included boomers from 45-50. So 30% seems very realistic compared to your "made up fairy tale" of 4%.

Call it Crazy says

That just plain sucks..... looks like many will be working until they are at least 80 (or die) just to pay their mortgages...

That's what it's looking like. The boomer population has very little retirement savings and many live paycheck to paycheck. Even if they owned a home free and clear, their increasing medical expenses, and day to day expenses, might not be covered by a small fixed income especially with Bernanke putting his foot down on the printing presses.

Goran_K says

Did you even read the study you quoted? Your assumption is again wrong, and suspect because you didn't even take time to read the study YOU found, instead just posting haphazardly, and making an assumption to fit your agenda. That's ridiculous.

From page 3 of your study:

As of December 2011, 16 percent of borrowers age 50+ were underwater on their mortgage loans, meaning the amount owed on the mortgage loan is greater than the value of the property.

The figures I found included boomers from 45-50. So 30% seems very realistic compared to your "made up fairy tale" of 4%

Page 1 of the study states "As of December 2011, approximately 3.5 million loans of people age 50+ were underwater—meaning homeowners owe more than their home is worth, so they have no equity"

You're right, I misread loans for people. My mistake.

Even at 16% underwater, that's still far from a majority, which I what I initially stated.
zesta says

I'd also assume that of the % of homes that are underwater, only a minority of those are held by boomers.

zesta says

Even at 16% underwater, that's still far from a majority

Yes, it is, but when you include the numbers I found from the Center for Economic and Policy Research in Washington which track a larger boomer sample than the study you posted:

The Center for Economic and Policy Research in Washington released a report which estimates that 30 percent of homeowners aged 45 to 54 are “under water” on their mortgage. (About 15 percent of older baby boomers, 55 to 64, fell into that category as well.)

...your "only a minority" and "4%" assumptions start to look dubious.

From age 45 to 64, the data seems to support over 30% of boomers are underwater currently.

Goran_K says

zesta says

Even at 16% underwater, that's still far from a majority

Yes, it is, but when you include the numbers I found from the Center for Economic and Policy Research in Washington which track a large boomer sample:

The Center for Economic and Policy Research in Washington released a report which estimates that 30 percent of homeowners aged 45 to 54 are “under water” on their mortgage. (About 15 percent of older baby boomers, 55 to 64, fell into that category as well.)

...your "only a minority" and "4%" claims start to look dubios.

1. Is 16% a minority or majority? How about 30%?

2. Do you still disagree with my statement: "I'd also assume that of the % of homes that are underwater, only a minority of those are held by boomers."

3. When was that study conducted?

4. And assuming we're still on the topic of "who the boomers will sell too?" How will 3.5M underwater loans spread across 20 years of boomers retiring impact the housing market?

bmwman91 says

Sorry Goran, the bad guys won. (bad guys being the fed/Wall Street/government/RE industry). House prices will remain high in the areas we live. There is hardly anything available to downsize to, especially since the cheaper RE market is being consumed by investors & insiders. The lower end stuff will reappear on the market sometimes, but it has been flipped and probably has an asking price that is not enough less than the BBs current house to be attractive. With so many BBs under water, they will be living there and paying it off forever anyway.

Options for first time house buyers like us are limited to a) take it in the ass and overpay, or b) move far away. Accept it. Life is a little more tolerable once you do. Waiting for a train that never comes really sucks the life out of you. Call me a quitter, but I gave up on a free market.

I understand where you are coming from. With Boomers and less promising prospects for higher paying jobs for new grads things will remain like this for another 10 to 15 years. Sometimes I just think my heavy stock market investment will bring that much needed cash for the over priced CA shack. LOL. Stock market rewards so far looks very promising to me - enough to compensate for an over priced CA property, not that I am saying prices are going up!

Goran_K says

Did you even read the study you quoted? Your assumption is again wrong, and suspect because you didn't even take time to read the study YOU found, instead just posting haphazardly, and making an assumption to fit your agenda. That's ridiculous.
From page 3 of your study:
As of December 2011, 16 percent of borrowers age 50+ were underwater on their mortgage loans, meaning the amount owed on the mortgage loan is greater than the value of the property.
The figures I found included boomers from 45-50. So 30% seems very realistic compared to your "made up fairy tale" of

If I may, part of the discrepancy between your numbers is what sections of the boomer world you are counting. For example, the snippet zesta quoted was:

"approximately 3.5 million loans of people age 50+ were underwater"

Whereas Goran's snippet was:

"16 percent of borrowers age 50+ were underwater"

Now clearly, the universe of people age 50+ is larger than the universe of people age 50+ who also hapen to be borrowers. (some own free & clear, some rent, some are in assisted living, etc.)

Unfortunately, it seems difficult to reconcile becasue the study frequently toggles between raw numbers and percentages. Still its entirely possible that both snippets are true if anyone wants delve in there and try to flesh it out.

zesta says

How about 30%?

I think 30+% is significant.

Also, your 3.5 million figure seems dubious and unrealistic. I think you're missing data. That would mean 4% of boomers have a mortgage (or is it boomers over 50 only), yet only 26,000,000 homes in the country are owned free and clear across ALL age groups. So either the boomer ownership rate is a lot lower than is understood, or your data is not complete. Like I said, I've been punching some pretty big holes in your assumptions, which is why I rarely make them. :)

Take it easy on Roberto, he was up late with the bottle again trying to forget he's a serial home debtor in an area whose water future is grim indeed.

CDon says

If I may, part of the discrepancy between your numbers is what sections of the boomer world you are counting. For example, the snippet zesta quoted was:

"approximately 3.5 million loans of people age 50+ were underwater"

Whereas Goran's snippet was:

"16 percent of borrowers age 50+ were underwater"

Yeah I read the first 8 pages, and while the AARP study seems well conducted and the data is summed up nicely, I think the diction seems unclear in some parts.

I trust the numbers from the Center for Economic and Policy Research in Washington D.C over AARP (I use their data for other studies as well in my own work).

The 3.5 million # was in his 2nd link. It is about 4% of the total baby boomers you cited (72 million). If, of the 72 million, 3/4 are married, then you have 45 million houses. If 33% are paid off, then you have 30 million mortgages. If 3.5 million are underwater, that is 12% of borrowers underwater. Those numbers aren't too far apart.

As boomers die, some of their kids will move in or sell the place and use proceeds to buy elsewhere. Also, people have been dying for a while now. Yes, there is a bigger crop of death door knockers at the moment, but you cannot just look at the number of them and think that they all represent a house that will be sold with none of the proceeds cycling back into the housing market.

YesYNot says

underwater, that is 12% of borrowers underwater. Those numbers aren't too far apart.

That's the thing, those numbers didn't track "all boomers". A sizable amount of boomers are under 50 as well. The Center for Economic and Policy Research in D.C tracked 45 to 54 and found 30% of boomers were under water (a source I trust more than AARP) in that age range, with older Boomers (55-65) underwater at a smaller rate (15%).

Also no assumptions are being made, we're trying to come up with data to support a theory. :)

This is a lot of speculation about what boomers will do when it's completely irrelevant.

The only thing that Real Estate is good for as far as the government is concerned is jobs.

Construction creates jobs, and mortgages create jobs.

From the governments perspective, debt is good for jobs.

Now if the economy ever moves off of the construction as an easy economic stimulus then you will see some movement in pricing.

All those shiney new degrees mean jobs outside of construction. Nobody wants to be a laborer any more.

Let's just call housing units done, we have enough, until the next housing crisis, and move on to something else.

A better way to look at it is that housing is now managed by the same people who sell us food at high prices, or gasoline at whatever price they choose today, or charge you 18% interest to buy your Holiday gifts.

Goran_K says

That's the thing, those numbers didn't track "all boomers". A sizable amount of boomers are under 50 as well. The Center for Economic and Policy Research in D.C tracked 45 to 54 and found 30% of boomers were under water (a source I trust more than AARP) in that age range, with older Boomers (55-65) underwater at a smaller rate (15%).

Also no assumptions are being made, we're trying to come up with data to support a theory. :)

Sure 30% can be significant, but it can also be considered a"superminority" Come on, I can admit I was rash in calculating 4%, you can admit that % of underwater boomers fits in the definition of a minority.

Your Center for Economic and Policy report was released in FEB 2009! A lot has changed in 3+ years, C/S is reporting 6 consecutive months of gains and underwater homeowners are trending downwards. That 3.5m in Dec 2011 is probably less now.

What's your definition of a Boomer? 48+ right? Those 45 year olds still have about 2 decades before they can retire, perhaps more since the lifespan and retirement age keeps going up. A lot (good and bad) can happen in those 20+ years.

zesta says

Sure 30% can be significant, but it can also be considered a"superminority"

I don't know about "super minority" and I'm not trying to shave numbers with an agenda here. All I want is a somewhat accurate estimate based on the data out here.

If 25% to 35% of boomers are underwater, I think the economic impact could be sizable, especially since many of them will want to try and retire instead of work until they die. Who wants them to do that anyway?

My point from the beginning has always been, if they can't get out from being underwater, and they are forced to die at work, that's seem pretty cruel, all for the sake of trying to keep home prices inflated.

Let the old timers downsize, sell at fair prices to the youngsters, so they can go fishing all day.

Goran_K says

If 25% to 35% of boomers are underwater, I think the economic impact could be sizable, especially since many of them will want to try and retire instead of work until they die. Who wants them to do that anyway?

My point from the beginning has always been, if they can't get out from being underwater, and they are forced to die at work, that's seem pretty cruel, all for the sake of trying to keep home prices inflated.

Let the old timers downsize, sell at fair prices to the youngsters, so they can go fishing all day.

Really, really? that was your point all along?

If you were truly that altruistic and selfless and wanted the boomers to "go fishing all day" without regards to your generation what would you do? You'd have no-doc loans at .5% and home buying incentives credits so that housing would inflate to 3x our current prices. THEN, you'd get your wish of old-timers downsizing so they could retire early and go fishing all day.

Spare me the "Save Grandpa" line.. It's more like "Goran_K wants a home in prime OC for $50k, F*ck all boomers" (which I have no problem with by the way, but at least say what you mean)