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Generational Luck in the Housing Market

• fullshark 3y ago
  This is the primary way for citizens to acquire wealth too, and the primary source of boomer wealth. The politics of this thing transcends the current Red/Blue paradigm, at least until battle lines will get drawn with various policy prescriptions and the winner/losers of each of them chooses a side. Will be the biggest issue facing American politics for the next 10+ years I think while the Boomers age and try to cash out.
  • davidw 3y ago
    It really is interesting to see how it does not fall along partisan lines. This leads to both good and bad surprises, where you find unexpected allies - as well as foes.
  • scroot 3y ago
    In the US the boomers are in for a world of hurt. Senior care is extremely low quality, increasingly scarce, and already unaffordable. The US medical system is completely unprepared for that entire generation to age out. It is already a crisis. At least they can spend down money from their homes to pay for some of it. The subsequent generations probably won't be as lucky.
    • dwater 3y ago
      Health care and senior care will end up being a massive wealth transfer from the boomers to the wealthy, as they finally turn their paper real estate wealth into hard dollars that they can spend. The financially lucky amongst their children will be those who have to experience the tragedy of their parents dying early enough to die healthy and leave their wealth behind.
  • downrightmike 3y ago
    Except that boomers have and are already cashing out, that wealth is used up because they didn't save and Social Security doesn't cover much. Reverse mortgages and Heloc loans destroy generational wealth. Nothing will be passed down to most kids.
    • panzagl 3y ago
      The California or Washington couple who sold Mom's house and moved here to start their lifestyle business is a common story in many western states.
• testval123 3y ago
  The FED implicitly transferred trillions from poorer renters and young people to wealthy older homeowners.
  • smallmancontrov 3y ago
    Yep. It was a real slap in the face.
  • bryanlarsen 3y ago
    Why blame the Fed? The low interest rates that made it easy to buy homes (driving up the price) also should have made it cheap to build homes which would have driven down the price. It was local regulations that prevented building homes.
    • testval123 3y ago
      It takes years to plan, get permits / financing, and build homes. It takes days/weeks to submit a bid or refinance a house.
      • dangles 3y ago
        It takes under 8 months to get permits and build homes end-to-end in parts of the US. It taking years is a local problem. As long as demand runs much higher than supply, prices will keep growing.
        • Der_Einzige 3y ago
          Usually places with no regulation look a lot like Houston TX. Do you know the situation depicted from the movie "Up" where there's a house surrounded by parking lots of malls and stuff? That's what low regulation building gets you. I'm not talking about NIMBYs, I'm talking about lax zoning laws.
    • enlyth 3y ago
      Among other things, I think interest only mortgages are a completely degenerate financial product that shouldn't exist, the only purpose is so someone can leverage themselves to the tits on housing
• JumpCrisscross 3y ago
  I'm a Millenial; my partner is on the cusp of Gen X. In terms of fucked generations, I'd argue those born in the early 80s are our currently most fucked (followed shortly by Gen Z). This is the generation that had perfectly-spaced financial crises in the dot-com and then financial crisis that wiped out two decades of aborted starts towards wealth. (In contrast, younger Millenals got the ZIRP era to build wealth and buy assets.) Gen Z just missed that run-up. (Unfortunately, it looks like a lot of my peers discovered their inner NIMBY the moment they signed their first mortgage cheque.) Alpha will be fine--they'll benefit from boomers unwinding their real estate to pay for senior care. Unfortunately, that's likely to financially impact us Millenial homeowners.
  • cableshaft 3y ago
    I was born in that time period. I would agree that in general people my age seem to be in a lot of trouble (I don't know about worst though, Gen-Z seems to be struggling a lot right now, and for them there's plenty of time for more fun economic struggles to happen). I'm also not where I should be financially despite the lucrative field, compared to others in my field, due to several setbacks (and also in part because I never had a Silicon Valley job). But thankfully I did choose the fairly lucrative field of software engineering, so even though I'm behind most other software engineers (including those younger than me), I'm still better off than most people around my age. I also lucked out and finally bought my first house in 2018 before the big run up in prices. I had to get lucky on cryptocurrency to help afford the downpayment though (bought ~$300 worth of Ethereum at ~$20 and sold it at $1300 just before it crashed hard).
    • smallmancontrov 3y ago
      If you bought a house in 2018, you don't get to complain.
      • deleted 3y ago
        [deleted]
      • cableshaft 3y ago
• DowagerDave 3y ago
  Probably not a sympathetic audience here, but if you look back more than the relatively short timeframe of 20 years things are far more cyclical. I grew up with double-digit interest rates, so while everything was cheaper, financing was far more costly. The generation that's now looking to buy a house grew up with a financed lifestyle (via their parents) that was essentially interest free and not sustainable in the long term. I see a lot of people who believe their first home should look a lot like their family home: new, desirable location and affordable. This has never been realistic.
  • testval123 3y ago
    House prices went down in the 80s (although were still quite unaffordable). Additionally, those who bought in the 80s got the ride the gravy train of lowering rates over the decades which massively boosted prices and allowed them to refinance.
  • jwells89 3y ago
    High interest on its own isn’t great but in some ways can be easier to grapple for first-time buyers, because while it does make for larger monthly payments it doesn’t raise the bar to entry the same way that high prices do with down payments. Low home prices with high interest can be manageable, as can high home prices with low interest. High prices and high interest is a tough combo. On top of this, even if prospective buyers are considering less desirable neighborhoods further from place of work, the used car market is still a mess with anything that doesn’t already have a foot in the grave (and thus, is a reliable efficient commuter) carrying an inflated price, which chips away at the savings that can be had there.
• CharlieDigital 3y ago
  Where I live, many of the houses were built by the same builder or at least using the same basic plan (I've even seen houses built 20 years later than mine with the same basic layout). My wife and I purchased in 2015. A short bit after, there was some regret as prices were still falling. I recently went to pick up my child at a classmate's house. They just purchased last year. I walked in and, sure enough, roughly the same house with minor differences in the layout...except it cost $300,000+ more. Not sure how my kids are ever going to own a house in the US and I feel like I am locked into this house and mortgage forever. In retrospect, we purchased near the bottom. Truly some generational "luck".
  • nickpp 3y ago
    > it cost $300,000+ more. Have you try to inflation-adjust that? You may find the price jump is not that great for the last ~10 years.
    • CharlieDigital 3y ago
      It's well, well above the rate of inflation.
      • nickpp 3y ago
        Official inflation from 2015 to 2024 was around 33%. If the house cost 1mil, then the entire appreciation of 300k was due to inflation. If the house cost 500k - over half of the appreciation was due to inflation.
    • pc86 3y ago
      In order for inflation alone to account for $300,000 delta in value they'd be spending so much on these houses that they would be fine financially by almost any metric.
  • JumpCrisscross 3y ago
    > Not sure how my kids are ever going to own a house in the US (EDIT: Inverse of) Median income to the average house price, across America, is at its highest point since the 80s (when we started measuring) [1]. [1] https://fred.stlouisfed.org/graph/?g=coAW https://fred.stlouisfed.org/graph/?g=coAW
• landedgentry 3y ago
  Calling it luck makes it sound like there are uncontrollable forces at work. However, these consequences are entirely downstream of artificial, man-made policies.
  • bluefirebrand 3y ago
    The year you are born is absolutely an uncontrollable force
    • deleted 3y ago
      [deleted]
    • riku_iki 3y ago
      But subsequent policies are the choice.
      • red-iron-pine 3y ago
        not until you're 18 and can vote. hopefully your parents have sane views towards public policy.
        • riku_iki 3y ago
          in this case those who the most benefited from fed policies are well over 18yo
    • Der_Einzige 3y ago
      Buddhists at least believe this to be controllable. It's the ultimate victim blaming religion - you're poor because you were a bad person in a previous life. Very awkward to jokingly say "I wish I were a puppy" when I play with my dog and to see the look of abject horror on my Buddhist partners face. I'm told even wishing for something like that significantly increases my chances of becoming a dog in the next life - which is permanently an undesirable fate.
      • 3y ago
• paulsutter 3y ago
  In 1981, 30 year mortgage rates were 16%, so this analysis is a little myopic to complain about 6%
  • ssully 3y ago
    Now do average cost of houses.
• oflannabhra 3y ago
  One thing that this article glosses over is that mortgage rates and the rate of home valuation increase have a loosely inverse relationship, as most people judge what they can afford based on their monthly payment. So, when borrowing is cheap, home valuation increase typically accelerates, and when borrowing is expensive, home valuation increase typically contracts. Obviously this effect is outweighed by supply/demand, and mortgage rates have a major impact on the size of the pool of buyers (and hence demand) as well.
• rndmize 3y ago
  I feel this was largely predictable, and for one reason I almost never see mentioned - the millennial generation just being larger than the one before or after. Millennials are noted as being the largest generation since the boomers, and their coming of age as far as prime home-buying time coincided with the collapse of housing construction post-2008. There's other things at fault, of course - zoning, economy, interest rates, etc. etc., but the current stress on the housing market lines up pretty nicely 80s-born millennials (particularly those that graduated into the great recession) finally hitting their stride and having the wealth to move out/stop renting/have kids, after most of a decade of that being suppressed. I'd expect this to continue being a problem for the rest of the decade and peter off in the 30s - it feels like governments are taking action (years late as usual, but better than not); movements like YIMBY have matured, boomers are hitting the age where they start to pass, and housing construction has ramped up slowly in the last 8-10 years, and millennials will have mostly bought by then, with gen Z being the new, smaller crop of buyers by that point.
• ilamont 3y ago
  I wish that articles like this would talk about the fact that many people are living in vastly oversized houses for their needs, and incentives (beyond property tax) could be better aligned for older empty nesters to sell. The neighborhood where I grew up is mostly made up of the same single family homeowners who moved there 30 or 40 or 50 years ago to raise a family, and whose kids are now long gone.
• mountainb 3y ago
  The 30-year-fixed mortgage combined with the many federal backstops on house prices is the real American social security program. This is also accentuated by the lavish pro-borrower policies at the state and federal level that make foreclosure very difficult. And the asset is protected in bankruptcy. If you do not buy in to the housing market, you are on the wrong end of every fiscal and monetary policy operating in the US. One way to reduce the pressure on the housing market to act as a secret pension is to reform social security. It's ridiculous that such a heavy tax on workers pays out such a pathetic amount at the end. The way that it works, the payroll tax money just gets embezzled by Congress, and then a tiny amount is squirted back into the accounts of the taxpayers once they are done embezzling it. Housing is important for reasons beyond just providing a pension-equivalent combined with shelter. However, there is little pressure to fix these things because the hidden housing benefit is so extravagant and so broadly held by so many voters. It really flips the switch on life to make it EZMode at the cost of mobility. There are still ways to screw up your life, of course, but you kind of have to go out of your way to do it.
• baerrie 3y ago
  I was born in the early 90s, was working in film in 2019, broke my back, joined a bootcamp three months later, got a job in 2020, got another 6 months later, and managed to find a house in April 2021 before things started climbing. The combination of back breaking, career changing, pandemic, oh yeah I also got married, and getting a house, all in an ~2 year period proves to me that I am indeed lucky