patrick.net

I saw the writing on the wall and sold out/moved out back in the spring of 2006. Glad to be out of the rat race and glad I got peak bubble prices for my tiny San Jose house.

In many circumstances, children don't continue to live near their parents, and they rarely are able to provide the level of long term care to their parents that's needed toward the end of their lives. Also, having an adult child move in can be extremely stressful.

Reverse mortgages are a better option for those low-income people (many seniors have incomes of less than $1,000/mo from Social Security only) who would like to have a life of some type, with vacations & such, rather than to sell and move. The downside of a reverse mortgage is that the homeowner is still required to provide upkeep. The upside is that they can afford it if they structure the mortgage correctly. And reverse mortgages are govt regulated to ensure that seniors aren't exploited (other than by those commercials that make reverse mortgages sound so wonderful in every instance).

Selling the home allows a person freedom (sometimes), and the opportunity to use the money for whatever they want (such as assisted living).

I agree boomers are in deep, but I'm not sure reverse mortgages will save them. I mean, isn't a reverse mortgage based on the home's value? And what about all those people who used their home's equity like an ATM during the boom years? My feeling is that while a reverse mortgage might keep them from eating cat food in their golden years, it isn't going to give them a pleasant retirement or even enough to afford care when they are no longer able to care for themselves. Gen X'ers, Gen Y's, and Millenials combined are too small a demographic to soak up the extra housing, even if they could get credit for mortgages. And the lower America falls economically, the fewer well-heeled immigrants, who could ultimately take up some of the housing, want to move here.

No, I think alot of places in the US, particularly where housing stock expanded rapidly in the boom years are going to become like parts of Detroit or Buffalo after all the jobs were outsourced in the 70's and 80's, and the people who had lived there for generations packed up to follow the new jobs in the south and southwest, without even trying to resell them. The only real way out of this overstock of homes is to artificially remove the excess buildings by bulldozing them and finding a way to keep the land from being used as a garbage dump once its been cleared. This pretty much requires the buildings owners (the banks) to give up the dream of recovery and recouping investment through resale. If cities like Detroit and Buffalo had done that way back when, they might not look like a graveyard to the American industrial age today.

I think boomers really need to use that creative, driven spirit they had in their youth and still have somewhere deep inside. Since they were born, boomers have made an art out of reinventing what an American life looks like, and if they can climb out of this psychological malais, I have faith that they can create new styles of retirement. Just off the top of my head... an old-age commune?

There are alot of people who are so low income that they can't afford to live, lost their investments and have no choice but to tap into their equity. Used to be that they had to take a second loan and then, when they couldn't pay, get forclosed upon.

Now they have the option of tapping into their equity while staying in the home. The target market is the person who lives in a paid-off home and needs extra income, to pay taxes for example. I've heard many children tell their parents that it's not a good option for the parents in order to inherit the house. But these same kids usually don't want to help the parents financially or can't afford to do so.

You'd be surprised at how many seniors lost their asses over the recent past and are badly in need of extra income just to get by.

My parents live in a fairly large house with 2 stories plus a basement. Bedrooms only on top floor. Mom is 76 and Dad is 80. For all the usual reason, in a few years they REALLY need to be in a much smaller one-story house. In a sane economy this would be a simple trade-down for them. Now what do they do? They live in NC and Mrs. Vicente & Little Vicente & I have jobs & lives in California. You think we are moving to NC? And do what? Try to get jobs in a dying furniture town? Do we have room for them to live with us? Heck no we live in a rented 2x1. This idea of kids moving home may work for some people but not all. A lot of retirees are literally going to be TRAPPED in houses that are no longer livable for them. Gridlock is not good for traffic, and it is not good for an economy either.

I would not be interested in buying a home in a reverse-mortgage situation.

Reason being, that when I buy, I want to be able to move in right away and not 5-10-15-20 years down the road.

As for the talk that reverse mortgage sales are going through the roof, my guess is that most of these sales are personal reverse-mortgages between family members.

http://www.consumerreports.org/cro/money/retirement-planning/reverse-mortgages-4-08/overview/reverse-mortgages-ov.htm

Vicente, do they have no desire to move to CA? I always thought the smart thing for older parents to do would be to give their paid off home to the children that want to take care of them in their old age. The kids could sell it and use the money to buy something for themselves that could also accommodate their parents if they are in a situation like you (in another state).

The people I see doing OK are part of families that help each other out, those that think in terms of generations and passing down estates, rather than this new totally individualistic and "spend what you got" society we have now.

"old-age commune" - a large part of Monterey and Sonoma counties here in CA were inundated with early retirement and retirement age older boomers from the Bay Area who moved there in the 1990's after selling their $140k townhome (EX: purchased in 1982) for $650k. Most of these folk are DINKS - now, both counties are inundated with foreclosures since they lived above their means - many borrowing against the home's "value" to purchase sight-unseen properties they intended to flip in Nevada, AZ, FL, and NM.

I'm a renter and I remember calling a prospective landlord 2 years ago (grandma age - she sounded older and stated her grandkids were playing in the background) who lives in Danville who bought a spec house in Las Cruces NM, never having even seen the place, intending to flip it for a quick buck thus driving up the cost of housing in an area where a high wage is $10-$12 dollars an hour. btw, although she was in Danville CA, she had an El Paso phone number. Tricky, very tricky.

Anyway, she'd never seen the place, a new construction DR Horton single-level near Mayfield HS.

I offered to give her a free assessment from the view of a long-time renter. Offer accepted. I drove there and passed Mayfield which no one in their right mind would send their kids there - picture East LA HS and that's it. A graduate from that HS would be the educational equivalent of a sixth-grader at Laguna Middle School in San Luis Obispo. Anyway....

I parked in the driveway; I walked around the premises and then called her on my cell and gave her my assessment of her property: 1970's apartment-quality construction with no storm drains in the street or rain gutters on her roof. Her backyard was entirely gravel with a chain-link fence that sloped to a large drainage basin (about 1/2 the size of a football field). Sparse landscaping in the front year with mostly gravel throughout.

Cheap carpeting and cheap light fixtures rounded out my assessment to her with the closing statement that the place would last about 5 years in the hot southwest with our monsoon weather in the summertime.

She hung up.

Sorry, no sympathy.

@Tude,

I wish everything were so simple. For most of America it is not. We live in a country that positively encourages you to go where the jobs are, not stay on the family homestead. Encourage everyone to form multi-generation housing again may have worked in farming days, but not so well in modern burbclaves. Oh you want to put on an "addition" or turn the garage into a bedroom or perhaps build a little mother-in-law cottage out back, sorry the codes don't allow that blah blah. This is a huge mess we are going to PAY for in many ways for decades.

Also, a reverse mortgage just delays the inevitable. Once the people die the home is sold by the bank so it will still be added to inventory.

My parents & all their friends that are now in their 60's have all been talking about selling their homes & moving to rural areas to find cheap housing. They can buy land dirt cheap & build new small homes for a good price, since their are so many struggling contractors looking for work. If they can actually sell their existing homes, which I doubt, it will only add to the existing suburban supply of homes...

We are baby boomers born in 1948. Sold our house before the bust. Have zero debt, no credit card debt, cars paid for and all in cash.
We have decided to buy in a Del Webb retirement community in a state without all the housing problems, which should offer some safety.
With more and more boomers coming, values should not fall in that type of place, and if one wanted to sell, should be easier with values holding up. Other than that scenario, I would not buy anywhere else in the country right now.

Actually, "values" are falling in all parts of the southwest, including Del Webb retirement communities in NV and AZ. Retirement communities are not immune from the downturn because older people lost a lot in the equity and bond markets over the past 2 years and so they do not have the retirement income stream from those investments as they originally planned. This reduced income means they have to move and results in greater numbers of these residences for sale.

http://phoenix.craigslist.org/wvl/reb/1266842194.html

(Please note that Sun City is on the list)

Further, many pension funds are bleeding to death having struck out with investing in CDOs and SIVs and MBSs during the runup and now those investments are worth nothing. So, retirees dependent upon a pension get a letter stating that the Fund will either no longer be able to provide a pension or that the expected pension amount must be reduced. This is already going on. This is another reason why "values" in retirement communities will continue to fall (I have seen this personally in NM) since boomers will no longer have the additional pension benefit to augment Social Security - which is what it takes to live in a retirement "village."

The collapse in our financial markets means that many companies will or are no longer able to provide health benefits to its pensioners. Older boomers who are in this scenario must then rely on Medicare unless they plan on paying more for some other health care coverage. All that takes money - so if having premium health coverage is important to them and they do not have adequate income coming in then they must adjust their lifestyle accordingly and move to a less expensive situation. I don't know how knowlegeable you are with retirement communities, but Leisure World requires a certain income level in order to buy into their community. The Los Angeles Times did an article some time ago about seniors going bankrupt living in Leisure World because they failed to account for the rising cost of medical care and how those costs INCREASE with age.

Perhaps you didn't, however, many persons in your age group invested in real estate hoping that the profits from flipping or other speculative conduct would fund their retirement. Obviously that strategy has failed and the opposite has developed: a financial catastrophe enveloping the entire world. Since the income stream from real estate investing has collapsed, the income needed to retire comfortably has been cut off and seniors in your age group that participated in this sort of thing now have to downsize.

In (above-mentioned) Sonoma and Monterey CA counties, that in fact is what has happened and I'm not sure where members of your age group are going to go. News reports on the internet are that they are having to move in with relatives.

Not sure what you mean by "safe" but in outlying areas or remote States, things may turn feral sooner in a currency collapse - just saying from my personal experience in living in NM; may want to consider that your food costs will be higher and if Cap and Trade is passed, your energy costs will most likely increase by 300 percent (three hundred). As an investor, I have seen some reports of 3000 percent increases in cold areas of the Northeast and Northwest. However, I'm not paying attention to those reports as I've chosen NOT to invest in the energy sector for moral reasons. Should you decide to move to a retirement area in an outlying area, you should really consider getting some sort of personal protection device such as a shotgun. One of my investment managers has told our group that gated communities will be among the first to be stormed by gangs and other unruly types should food shortages come about. Retirement communities fall into this category and are vulnerable more than they thing, in particular being known for having elderly men as gate guards. This is particularly true for Leisure World Laguna Hills/Seal Beach and Sun City.

If I were you, I'd stop looking at a home in investment terms ("values holding up") and simply focus on the fact that a home is shelter. That way, we don't ruin it for younger persons by turning a basic human need into a Vegas roulette wheel.

Hey TOB, how's things going!?

Yep, the thing that AZ people tell me about Sun City is that the Number One topic is "who died." Same with Leisure World Laguna Beach.

Whatever its current problems, AZ will come out of this economic crisis SOONER and stronger than CA simply because of passage and enforcement of the Illegal Allien Employment Law.

I am not talking about Arizona. Things here are horrible even in the Del Webb communities. I am talking about relocating to Texas, even though property taxes are higher, no state income tax. Also it looks like AZ is about to increase sales tax by 1% and increase property taxes to cover the still remaining $2 billion budget shortfall even after the passed new budget. We all know when there is a shortfall, the taxpayers will ultimately pay.
Texas has had no boom and no bust. Values continue to creep up by 2 1/2% to 3% a year.
Also all the local realtors that are honest(I know, an oxymoron), are saying the next wave of foreclosures are close and it looks like no comeback until 2017 in AZ. Thats a long ways off.

A couple of additional comments. I have plenty of home protection. In southern Texas I will have access to health care in MEXICO.
Basically I agree with MISSTRIAL that the USA is going to hell.

There’s lots of things we can put people to work doing, primarily getting us off oil and onto solar energy, which is very much within our means at this time.

This is a very (VERY) nice thought, but not too realistic. We will never replace oil. Far too many things depend on this very cheap energy source, and not just gas/heating oil. Think about anything that is plastic or vinyl, and you start to get the idea.
Whether you believe in Peak Oil or not, the below is recommended viewing. In patricluar, 13:00.
http://www.youtube.com/watch?v=cwNgNyiXPLk

grefra:

If you have a pet that needs the a/c on 24/7 in the summer, be prepared for high energy costs in S. Texas.

One thing: property taxes in TX are upsetting to some Texans who have moved to Anthony, NM. Anthony is a small town that straddles the TX and NM border about half an hour from El Paso off the 10 freeway. What the Texans are doing to escape the high property taxes (they call Texas "Taxas") is that they buy a house in Anthony on the NM side but still keep their Texas identity.

Local info:

TX and NM have a special regard for each other and the time zone in El Paso is the same as NM (Mountain Standard Time) while the rest of TX is CST.
Cloudcroft in NM is the closest TExans can get to cool mtn temps and tall pines. They sort of regard Cloudcroft as part of Texas. There is an excellent Texas BBQ place on the main hwy through Cloudcroft next to a real estate office.
Texas is doing very well and is one of the States that's not in need of any bailout money. Austin is doing well and so is San Antonio.
Lots of Northern Texans are angry at Brownsville and El Paso for letting in so many illegals.
Rudy's in El Paso has the best Texas BBQ - yummm!!!
"Big hat, no cattle" is Texas trash talk of those who drive lease luxury cars and live in McMansions but who make $30k/year. Another sayin' that originated in Texas is the famous: "$30k Millionaire" meaning the same.
Texas owns the water flowing in the Rio Grande that runs through NM. The pecan farmers are a big deal in both States and from the air, you can see hundreds of square miles of agriculture on the US side of the Rio Grande.

Best to you and watch out for the Mexican pharmacias. Some of them sell Chinese and Indian knockoffs of prescription medicines.

Solar is not $2W yet. The 208W and 215W panels from Sharp and REC are still about $900-$1K each, so it's $4-5/W just for the panels, not including the inverter, grid tie, mounting and labor. $7-9W is still pretty accepted pricing out there for solar.

Texas is doing very well and is one of the States that’s not in need of any bailout money. Austin is doing well and so is San Antonio.

Not really...sales tax revenues are down in Austin for the fourth straight month, and that includes huge revenue generators such as SXSW and the ROT Rally, (Republic of Texas - lame). Also, layoffs are up and median incomes are down 1% from last year. It isn't as bad as AZ, FL, CA, et al, but it's clearly more a case of lagging national trends than immunity from national trends.

TOB: We shall see what we shall see...I stand by my assertions, (would love to be wrong), that oil is not going away. Not in your lifetime, or mine. I would gladly put a cash bet down on this, and I despise gambling.

ROT rally - what is that about?

In essence, Daytona Beach comes to Austin. The premise is a secessionist Rally, but first and foremost, it's a revenue generating venture that fell flat.

grefra:

Just wanted to add that moving too close to Mexico could be problematic with the drug wars going on. In El Paso, you can look across the border to see Federales on the overpasses carrying machine guns.

Also: to show how much they despise the new Border Fence, criminal gangs in Juarez throw the body parts of their victims over the Fence; you won't hear of this in the major networks, but in the El Paso Times, possibly.

Elsewhere in TX in border towns, there is increased violence due to the drug and civil war going on in MX; it spills over since the border towns, esp Brownsville have latino mayors/city councils (almost all of them are 2nd generation anchor babies) that are sympathetic to local hispanic businesses that cater to the Mexican market, illegal or legal - its all the same to them.

Also: to show how much they despise the new Border Fence, criminal gangs in Juarez throw the body parts of their victims over the Fence; you won’t hear of this in the major networks, but in the El Paso Times, possibly.

...anything usable? Could be a nice little side business.