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Housing policy has been a generational transfer of wealth.
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2011 Mar 22, 10:12pm 10,599 views 61 comments
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In terms of housing: older boomers, those who were able to buy before the inflation of the 1970s, like the parents of the boomers, got mortgages in high-value dollars and paid them off in low-value dollars. So say, anyone in their late twenties by 1973. Younger boomers weren't able to do that, as someone born in the mid-1950s was barely out of high school in 1973. Two completely different worlds.
In terms of housing: older boomers, those who were able to buy before the inflation of the 1970s, like the parents of the boomers, got mortgages in high-value dollars and paid them off in low-value dollars. So say, anyone in their late twenties by 1973. Younger boomers weren’t able to do that, as someone born in the mid-1950s was barely out of high school in 1973. Two completely different worlds.
Ok I get it now. The bad boomers are the ones who are already retired?
The ones who really made out are those who could sock away significant sums in the 80s, when money markets were paying 16-18% interest (FDIC guaranteed baby!). Unfortunately, I didn't have much to put away during those years, I was paying 13% on a mortgage loan.
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Maybe Surfer-x was right. He was always critical of Baby boomers. But could there be a point to this. Take these: (1) The housing interest deduction (2) 1031 exchange -the carrying over, tax free, of massive amounts of capital gains from selling a house (owner-occupied). (3) Proposition 13 (in the case of California), (4) the shift of one income to two come homes (and perhaps even more importantly– the qualifying of the second salary for household income with banks and other lending institutions.) (5) The tax credit under Obama (although this one didn't cause a lasting paradigm shift) ... and (6) Whatever else I missed. Each of these really just raised the cost of housing for the next round of purchasers. The beneficiaries are really those who already owned houses and it never really became relatively more affordable to those who are now first-time buyers.
#housing