4 ms·

I think what might change things (at least in the US) is the demographic shifts. Housing demand (and so, related, prices) is obviously related to the number of

by cbanek 6y ago

I think what might change things (at least in the US) is the demographic shifts. Housing demand (and so, related, prices) is obviously related to the number of people and what they can pay. If anything, the lowering of the 10 year yield, which is used to determine mortgage rates, allows people to spend more for a house due to the low interest rate. If interest rates go up, then the prices should go down to keep steady with what people are able to pay for a monthly mortgage. Same thing about all the retirees eventually dying off and liquidating or handing down all this money, stock, and housing (honestly, I feel the same about political leanings, but that seems fairly steady unfortunately). Seems like if history has shown us anything, while one person might be good with money, the same can't always be said for their children (3rd generation rule - by the 3rd generation, 90% of wealthy families lose it).

ryandrake 6y ago
I wouldn't bet on some major wealth-transfer from the boomers to their kids. I think a lot of them subscribe to that whole "die broke" philosophy and are using things like reverse mortgages to live it up on their inflated home equity, hoping to die just as the bank owns their home.
- TristanBall 6y ago
  I can't find the link now, but at least in Australia this doesnt appear to true. We have a reverse mortgage system here, and the take up is extremely low ( I think it was <10,000 for the whole country). Particularly with house prices here being completely insane, parents very much want to leave houses to their children. I've also read multiple articles around how to get, or encouraging, retirees to be comfortable actually spending their retirement savings, rather than the interest/earnings from those savings, given its so hard to get a living income that way. I think the 'die broke' crowd will be limited to a very small sliver of any generation... those poor enough that they have a chance to actually spend all their money, but well off enough that their children own their own houses ( possibly debt free )
- imtringued 6y ago
  I honestly don't see how it would work out. The vast majority of boomers are not rich. They were doing fine because they lived in an era where job training was easily available but if they lost their job before retirement they end up just as poor as their kids. They might own a nice house but it's not always where you want to live. You sell it and then go somewhere where that money is probably only enough for the down payment.
cat199 6y ago
> If interest rates go up, then the prices should go down to keep steady with what people are able to pay for a monthly mortgage. ... this is ignoring the 10000-unit gorilla that is appreciation of the underlying based on speculative investment and not based on actual supply/demand for housing itself ...
- imtringued 6y ago
  Having expensive housing should be a benefit in principle. It's easier to justify building large apartment blocks and thereby provide lots of housing. Unfortunately nobody is building large apartment blocks.
satellite2 6y ago
I never heard about the 3rd generation rule before. But searching it seems to lead only to anecdotal reports, hearsay and a Chinese saying / belief. The current litterature seems to suggest that on the contrary wealth easily pass down generations. The recent book Capital in the 21 century by Piketti is one of the largest analysis of wealth distribution based on tax data in most western countries for the last century. Two economists from the bank of Italy went even further and analysed tax data up to 1427 in Florence. They found that "The top earners among the current taxpayers were found to have already been at the top of the socioeconomic ladder six centuries ago." So it seems that the data suggest that the third generation rule might only be a way for rich people to teach their kid to be careful with their wealth don't you think? If you have more data I would gladly read about it.
- imtringued 6y ago
  There is a problem with passing down wealth. If you split the wealth among all children it will become insignificant by the third generation. This is generally why the first born son received the entire inheritance in the past.

by cbanek 6y ago

ryandrake 6y ago

I wouldn't bet on some major wealth-transfer from the boomers to their kids. I think a lot of them subscribe to that whole "die broke" philosophy and are using things like reverse mortgages to live it up on their inflated home equity, hoping to die just as the bank owns their home.

TristanBall 6y ago
I can't find the link now, but at least in Australia this doesnt appear to true. We have a reverse mortgage system here, and the take up is extremely low ( I think it was <10,000 for the whole country). Particularly with house prices here being completely insane, parents very much want to leave houses to their children. I've also read multiple articles around how to get, or encouraging, retirees to be comfortable actually spending their retirement savings, rather than the interest/earnings from those savings, given its so hard to get a living income that way. I think the 'die broke' crowd will be limited to a very small sliver of any generation... those poor enough that they have a chance to actually spend all their money, but well off enough that their children own their own houses ( possibly debt free )
imtringued 6y ago
I honestly don't see how it would work out. The vast majority of boomers are not rich. They were doing fine because they lived in an era where job training was easily available but if they lost their job before retirement they end up just as poor as their kids. They might own a nice house but it's not always where you want to live. You sell it and then go somewhere where that money is probably only enough for the down payment.

cat199 6y ago

> If interest rates go up, then the prices should go down to keep steady with what people are able to pay for a monthly mortgage. ... this is ignoring the 10000-unit gorilla that is appreciation of the underlying based on speculative investment and not based on actual supply/demand for housing itself ...

imtringued 6y ago
Having expensive housing should be a benefit in principle. It's easier to justify building large apartment blocks and thereby provide lots of housing. Unfortunately nobody is building large apartment blocks.

satellite2 6y ago

I never heard about the 3rd generation rule before. But searching it seems to lead only to anecdotal reports, hearsay and a Chinese saying / belief. The current litterature seems to suggest that on the contrary wealth easily pass down generations. The recent book Capital in the 21 century by Piketti is one of the largest analysis of wealth distribution based on tax data in most western countries for the last century. Two economists from the bank of Italy went even further and analysed tax data up to 1427 in Florence. They found that "The top earners among the current taxpayers were found to have already been at the top of the socioeconomic ladder six centuries ago." So it seems that the data suggest that the third generation rule might only be a way for rich people to teach their kid to be careful with their wealth don't you think? If you have more data I would gladly read about it.

imtringued 6y ago
There is a problem with passing down wealth. If you split the wealth among all children it will become insignificant by the third generation. This is generally why the first born son received the entire inheritance in the past.