Recession Generation Opts To Rent, Not Buy Houses Or Cars

[Deckard]

Read it all here

The day Michael Anselmo signed a lease on his first apartment in New York City, he lost his job at Buck Consultants LLC. He spent about 10 months struggling to pay rent with unemployment benefits. Two years later he’s still hesitant to buy a home or even a road bike.

“Every decision that I have made since I lost my job has been colored by that insecurity I feel about the future,” said Anselmo, 28, who now rents an apartment in Austin, Texas, and works as a consultant for UnitedHealth Group Inc. “Buying a house is just further out on the timeline for me than it used to be.”

Anselmo and many of his peers are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.

As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers like Anselmo, said Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers, the state university of New Jersey.

“This is a generation that is scared of commitment, wants to be light on their feet and needs to adjust to whatever happens,” said Zukin, who’s researched the effects of the recession on recent college graduates. “What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it.”

More at the link.

Thing is, for most people in the U.S. no job = no health coverage, a massive risk that nobody wants to face.

Renting offers the flexibility to up sticks and get a job elsewhere.

In other words, in a recession depression priorities change, and renting is the smart option, not just money down the drain as EAs would have it.

[Self Employed Youth]

You would have to be mad to buy a house with a mortgage in a world without job security. Perhaps if you had a secure public sector job and had some employment rights, it might make sense.

Otherwise you would risk entitlement to the Housing benefit you require to live with a roof over your head. That is the system, at mortgage is a product that worked well in a system where job security was rife. It doesn't make sense for today's world.

[Venger]

R4 / World Service has twice broadcast a piece tonight about US graduates, and their plight with housing.

One guy a young science teacher at a school, $40,000 debt from university, despite working a job throughout his studies. Says no bank will consider him for a mortgage until he pays down that student debt.

He said he'd studied to improve his situation, from that of his blue-collar father, but much worse off than him now, versus housing situation. That he won't be getting any real-estate inheritance, or parental help-outs from housing rich parents, like others have/will.

Both he and his wife saying "they just want a home." Not at any point did the woman for doing the R4 interviews in the US, raise fact that there might be a problem for house prices for younger people. Just silent acceptance house prices forever stay price stable or rise. The would-be buyers also were also not questioning their position or situation. Just wanting the debt to pay asking prices.

Not asking themselves if it's fair and if FTBs priced out, who will continue to buy at prices they can't afford/get debt on, and if who is buying is recipient of overly easy money to spend/borrow via unfair policies (QE ect).

His wife said if they landlords decide to sell, giving the impression they lived nearby and were very nice people, "they will have nowhere to go."

Interviewer said that first Time Buyers falling out of the market, compared to the levels in years past. Maybe being forced to rent is best for a lot of young people until they wise up, and begin asking questions.....

On the latest broadcast, they followed up with a couple of guests in the studio. One still had $38,000 outstanding, having graduated owing $150,000 having stayed in education for longer than others. He went on to say incomes are pretty much flat over 25 years, but people owe 3 times as much, having been living used credit to subsidise things.

Edited April 2, 2014 by Venger

[Errol]

'What once was seen as a solid investment, like ... a car'

Eh? How can a car be a 'solid investment'?

[Quicken]

Both he and his wife saying "they just want a home." Not at any point did the woman for doing the R4 interviews in the US, raise fact that there might be a problem for house prices for younger people. Just silent acceptance house prices forever stay price stable or rise. The would-be buyers also were also not questioning their position or situation. Just wanting the debt to pay asking prices.

Compare the political and media consensus on climate change and land/house prices.

Climate change:

Temperatures are rising and rising temperatures are a bad thing, so we must take action to prevent rapid temperature rises.

Land/house prices:

Prices are rising and rising prices are a good thing, so we must take action to ensure further price rises.

[Jack's Creation]

'What once was seen as a solid investment, like ... a car'

Eh? How can a car be a 'solid investment'?

Just for you Errol......

[Bruce Banner]

I walked past a new car showroom, yesterday, and noticed that not a single car had the price on it, just a monthly figure emblazoned down the side.

It's not what you can afford, it's how much you can run to each month.

[@contradevian]

I walked past a new car showroom, yesterday, and noticed that not a single car had the price on it, just a monthly figure emblazoned down the side.

It's not what you can afford, it's how much you can run to each month.

I can see why. Almost all them now cost more than I ever paid for a house.

[tomandlu]

Just for you Errol......

I like this one more

[Errol]

Just for you Errol......

Well, that's entirely different!

However, I'm a bit worried that you have posted a picture of my car, number-plate and driver. This is an invasion of privacy.

Edited April 2, 2014 by Errol

[zugzwang]

Subprime auto loans. Because banking criminals got away with it once already.

[Jack's Creation]

Subprime auto loans. Because banking criminals got away with it once already.

Wonder how much of that is leasing.

[Jack's Creation]

Well, that's entirely different!

However, I'm a bit worried that you have posted a picture of my car, number-plate and driver. This is an invasion of privacy.

Ha!

[winkie]

I walked past a new car showroom, yesterday, and noticed that not a single car had the price on it, just a monthly figure emblazoned down the side.

It's not what you can afford, it's how much you can run to each month.

They don't want your cash....they want your credit or to lease/rent it........you are right so much per month for ever and a day....your income is then made up of lots of amounts to lots of people for stuff you can't remember buying but will forever be paying for.....

[martymcfly]

They don't want your cash....they want your credit or to lease/rent it........you are right so much per month for ever and a day....your income is then made up of lots of amounts to lots of people for stuff you can't remember buying but will forever be paying for.....

I bought a car a few years back with money I had saved. Was called into the office when it came to sorting out payment where they tried to convince me it was in my best interest to buy the car on finance rather than pay outright. Even tried to lie to me about the interest rate it would cost. Unreal.

[zugzwang]

They don't want your cash....they want your credit or to lease/rent it........you are right so much per month for ever and a day....your income is then made up of lots of amounts to lots of people for stuff you can't remember buying but will forever be paying for.....

And even when their reckless and irresponsible lending bankrupts them your govt will be on hand to bail them out no questions asked and the rent extraction will continue as tax.

[byron78]

Ah. Got to love the USA.

What a utopia of freedom that place has become without the ills of socialism eh?

[The Ayatollah Buggeri]

Well in this bit of the US, some people are still buying houses. Three have gone on the market in our development since Christmas, and all went within a week, for well over their asking price. An identical one to ours, bought for $159k in 2008 (the bottom of the crash here), has just sold for $215k. And if the pictures on Zillow give an accurate impression, it does not have some of the interior upgrades that ours does.

As for cars, there is a snob value about them here that I don't think is as bad in the UK. Last month I was advised by a friend of my wife's that driving a 2004 Civic was a liability, and that showing up to a job interview in it would have me ruled out before I even walked into the building (even though the vehicle in question is scrupulously maintained and looks almost like new). Even my wife doesn't really believe me when I claim that it's perfectly safe and reliable. Since we were married last summer, her 2012 Lexus has broken down twice (complete battery failure the first time, radiator cap burst open the second), and my Civic not at all, despite doing over three times the mileage during that period! Nevertheless, she believes the breakdowns to indicate that her 2012 car is now "worn out", and has her eyes on a brand new one. Sigh.

[The Knimbies who say No]

Well in this bit of the US, some people are still buying houses. Three have gone on the market in our development since Christmas, and all went within a week, for well over their asking price. An identical one to ours, bought for $159k in 2008 (the bottom of the crash here), has just sold for $215k. And if the pictures on Zillow give an accurate impression, it does not have some of the interior upgrades that ours does.

As for cars, there is a snob value about them here that I don't think is as bad in the UK. Last month I was advised by a friend of my wife's that driving a 2004 Civic was a liability, and that showing up to a job interview in it would have me ruled out before I even walked into the building (even though the vehicle in question is scrupulously maintained and looks almost like new). Even my wife doesn't really believe me when I claim that it's perfectly safe and reliable. Since we were married last summer, her 2012 Lexus has broken down twice (complete battery failure the first time, radiator cap burst open the second), and my Civic not at all, despite doing over three times the mileage during that period! Nevertheless, she believes the breakdowns to indicate that her 2012 car is now "worn out", and has her eyes on a brand new one. Sigh.

Pretty nuts about the job interview/car attitude. Even more so when Cali is the land where cars just don't rust. I got the impression when I lived Stateside that people were terrified of prodigious labour rates in main garages and would prefer to buy a new one once anything out of the ordinary servicing items needed done. Nice if you have the dough to burn but rather a waste otherwise.

I guess you have not shown Mrs B your car spreadsheet from Blighty..

[The Ayatollah Buggeri]

Pretty nuts about the job interview/car attitude. Even more so when Cali is the land where cars just don't rust.

Not only do they not rust, but they tend not to do short journeys from cold, either (distances, even local ones, are just too great), and so with the basic maintenance as prescribed by the Haynes manual, they'll go for 150k miles before requiring any significant TLC. About the only environmental challenge they face is that the road quality is absolutely atrocious - even worse than in Britain - with monster potholes, rough surfaces and a generally bone-rattling ride on virtually every road in the state. CalTrans simply doesn't do resurfacing: it appears to be against their religion. I've had to replace all the wheel bearings on the '04 Civic and a couple of wishbone joints as a result. But a couple of hundred dollars on parts and a couple of Sundays fitting them is a damn sight cheaper than a new car.

I got the impression when I lived Stateside that people were terrified of prodigious labour rates in main garages and would prefer to buy a new one once anything out of the ordinary servicing items needed done. Nice if you have the dough to burn but rather a waste otherwise.

That didn't really enter the equation for me, as I do my own maintenance. But I get the impression that they're not too bad here. From what I gather, $30-40 an hour is the going rate.

I guess you have not shown Mrs B your car spreadsheet from Blighty..

The last time she visited, she was trying to persuade me to rent a car for the Yorkshire to London journeys rather than travel in my Fiesta!

[Guest TheBlueCat]

I bought a car a few years back with money I had saved. Was called into the office when it came to sorting out payment where they tried to convince me it was in my best interest to buy the car on finance rather than pay outright. Even tried to lie to me about the interest rate it would cost. Unreal.

Get your revenge by taking dealer finance along with the associated 'discount' then cancel the finance within 2 weeks as allowed by the consumer credit act.

[Venger]

I enjoy your posts Ayatollah.

Re > U.S. housing market still in the doldrums <

Only in some areas. 'Network-effect' areas powering away in prices/values anyway. Money being pulled from other world locations to concentrate on prime areas, paying big prices, for jobs and protection (ect) it seems. USA vs other countries. Similar to raging demand, ever higher prices, for London housing (so far) vs others.

Housing ‘in a funk’

US Home Market: Few Buyers and Not Enough Sellers

WASHINGTON April 3, 2014 (AP)

Entering the 2014 spring buying season, the U.S. housing market faces an unusual dilemma: Too few people are selling homes. Yet too few buyers can afford the homes that are for sale.

"Both sides of the equation are in a funk," said Glenn Kelman, CEO of the real estate brokerage Redfin.

... WHERE ARE THE SELLERS?

Good question. It's slim pickings for a lot of would-be buyers. .... "We're all trying to figure out where the sellers are," said Redfin CEO Kelman. "Everyone seems to be waiting until April or May or June."

About 60 percent of Redfin buyers faced bidding wars in February, down from 73 percent at this time last year..... When few sellers emerged last year, prices for the limited number of homes available surged. Would-be buyers, facing a shortage of homes and locked in competition with one another, raised their offers. ...... Higher prices should lure more sellers into the market who see an opportunity to cash out. That would then then lead to more listings and ease the face-offs among buyers.

... Much of that shortfall can be summed up simply: Too few first-time buyers. They bought about 1.5 million homes last year, about 500,000 fewer on average than they would have typically. Last year’s price increases makes affordability a growing obstacle for first-timers, said Jed Kolko, chief economist for the online real estate firm Trulia.

in full: http://thedailyrecord.com/2014/04/03/on-buyer-seller-side-housing-in-a-funk/ or if subscription only, on 3 pages here http://abcnews.go.com/Business/wireStory/improving-us-home-market-facing-obstacles-23178474

Also worth reading: (April 3, 2014) http://money.cnn.com/2014/04/03/real_estate/priced-out-homebuyers/index.html

6 people housing situation: (April 03 2014) http://money.cnn.com/gallery/real_estate/2014/04/02/housing-priced-out/index.html

Related: Venezuela money helps fuel Miami housing boom. There are a lot of buyers from South America, mostly Venezuela, and they've pushed home prices up.

[Bradbury Robinson]

Last year I started a new job and was working with a lot of younger people, mostly aged 18-30. I noticed that there seemed to be a very widespread consensus in the office that renting, primarily houses and cars, was the way forward and the only thing that mattered was if you could afford to cover the monthly payment. Purchase price, interest rate and total paid were pretty irrelevant.

On houses a couple were resigned to never being able to own a house/home of their own. One had too much debt and stated that it would be too much effort to repay the debt and then save for a mortgage. The other simply pointed out that prices were too high to make a purchase viable.

Cars were quite popular in the office and there were a couple of them with £30-£40k cars on finance deals which were setting them back a few hundred pound every month. Another got a new car on HP and then decided after a while that he didn't like it so returned to the dealer after a few months and 'swapped it' for a model with a higher spec.

I'm not being critical of their choices, we each have to make our own as we go, but the principle of saving and buying seems to have been dropped for one of have it now and pay later.

[Sour Mash]

Last year I started a new job and was working with a lot of younger people, mostly aged 18-30. I noticed that there seemed to be a very widespread consensus in the office that renting, primarily houses and cars, was the way forward and the only thing that mattered was if you could afford to cover the monthly payment. Purchase price, interest rate and total paid were pretty irrelevant.

On houses a couple were resigned to never being able to own a house/home of their own. One had too much debt and stated that it would be too much effort to repay the debt and then save for a mortgage. The other simply pointed out that prices were too high to make a purchase viable.

Cars were quite popular in the office and there were a couple of them with £30-£40k cars on finance deals which were setting them back a few hundred pound every month. Another got a new car on HP and then decided after a while that he didn't like it so returned to the dealer after a few months and 'swapped it' for a model with a higher spec.

I'm not being critical of their choices, we each have to make our own as we go, but the principle of saving and buying seems to have been dropped for one of have it now and pay later.

Yeah, the general public are being conditioned to willingly accept the notion that they can never outright own expensive things and are more than happy to consider essentially renting them as the norm and equivalent to owning. Nothing wrong with renting if that's what you want but if you tot up the overall extra costs that they are incurring by things like a perpetual string of 2 year fixed mortgages on overpriced houses and leasing cars that they could never realistically afford to buy, it's a massive drain and possible only through the individuals assuming ever more debt.

Still, I'm sure it'll all work out OK. What can possibly go wrong?

[Venger]

Sigh.

This thread got me googling last night, about the not buying car thing. Lots of different views out there. Too expensive a car gets you in trouble. Too old a car and you're bringing down the company. Perhaps safer not to own a car, if you don't really have to - although less so in many parts of USA where families need 2 to ensure they're not stranded.

8-page 2011 USA thread.

Nice car or beat up car to the interview?

http://www.city-data...-interview.html

Another company, where our office was at, it was not a nice neighborhood and I drove a beat-up truck and I got in early enough that I got the best parking spots. One of the low level executives had my car sticker-ed and I was called in and told to park it away from the building. I was also told that I was paid enough money that I should go and buy a vehicle that was commensurate with my position.

Also in that company, I positioned myself to be debt free including not having a mortgage and that hurt me on pay increases. My manager actually got information on how I paid my house off ! Assuming from the county. He mentioned to me that a person at a certain age should be in a certain amount of debt, therefore didn't get the pay increases like other people. In other words, got punished for being too successful on money at the time. Of course I forgone a lot of nice things so I could get out of debt !

In many ways I have to giggle at this.

I never took the CPA-- ended up taking a different direction altogether with my accounting/finance degree-- but every single CPA I know (professors, colleagues, alumni, friends etc) never drive new cars-- and definitely not 50k Mercedes. Most of them drove new to them cars-- because none of them could ever get out of their head the fact that a car is by no means an asset but a liability that is going to depreciate. Perhaps an asset if you outright owned it until it begins to depreciate from that 50k price tag.

The question is timely because I had this convo with my family at lunch yesterday since they kept asking when I was going to get rid of my 2003 Saturn. *lol*