Thursday, June 26, 2008

Home-price declines will eat into boomer retirement nest eggs: report

Housing crash hits baby boomers

The collapse of the housing bubble will likely have drastic implications on the wealth and retirement of certain baby boomers, according to a report Tuesday by the Center for Economic and Policy Research. The picture gets even worse if real home prices fall more. If prices, adjusted for inflation, fall 10% by 2009, the median household would see a 35% drop in wealth compared with the same age group in 2004; and if prices fall by 20%, there would be a 46% difference. Plus, many of these boomers are "going to be facing a mortgage payment well into retirement," Baker said. That's a shift from past generations: The major asset that most middle-income families in years past would bring to retirement was their home - and it was often paid off, the report noted.

Posted by malct @ 12:24 PM (1468 views)
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16 thoughts on “Home-price declines will eat into boomer retirement nest eggs: report

  • Plus, many of these boomers are “going to be facing a mortgage payment well into retirement,” Baker said. That’s a shift from past generations: The major asset that most middle-income families in years past would bring to retirement was their home – and it was often paid off, the report noted.
    “Unfortunately, due to the rise and collapse of the housing bubble, this may not longer be the case,” the authors wrote in their introduction.

    Moreover, the authors suggest that homeownership is not always an effective way to accumulate wealth, and they blame economists and policy professionals for not recognizing the housing bubble that they claim could be seen as far back as 2002.
    “Unfortunately, we had this huge cohort of baby boomers and they really weren’t paying attention,” Baker said. “People who should have been saving for their own retirement weren’t.”

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  • george monsoon says:

    This will only affect current homeowners. I wonder how the statistics will look if you measure against a FTB in 2010, providing of course that they can get a mortgage.

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  • george monsoon says:

    This will only affect current homeowners. I wonder how the statistics will look if you measure against a FTB in 2010, providing of course that they can get a mortgage.

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  • i remember the 90`s says:

    Well i`m 51 just on the edge of boomers and i know a lot of people about my age who are going to be in the brown stuff with what they still have mortgaged at retirement time for myself i been on here for several years reading the wisdom of many (i looked for sites like this because i think like most of you but don`t have your writing skills)and its even worse for people i know 20 years younger a lot of them don`t even have a pension in place and if they have to retire early like me through health reasons god help them !!!!!

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  • Good. It’s that generation who’ve priced 20-somethings out of the market, not least through buy to let.

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  • I sympathise with them wanting to find a better alternative to pensions, but seeing as most of these have fuelled the BTL boom, and effectively stolen the younger generations wealth and spent it, I have little sympathy at all. In fact, I am waiting for a C76 laugh.

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  • Well that’s the pensions crisis solved – these people will all have to stay in work long past retirement age. Even the ones without mortgages will need a part-time job just to cover the heating bills.

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  • no sympathy for the generation that made it ok to be 58 and date a women at 21.. no morals.. it’s ending in tears.. eat soup my friends… eat soup…

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  • Well let’s look at the alternative :

    Euthanasia looks to have a bright future if you’re looking for a booming future business.

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  • letthemfall says:

    This article stretches the definition of a baby boomer a long way. The true boomers are children of the immediate post-war years, and those I know are sitting pretty with good pensions as well as houses bought before the 80s housing boom. Pop into a gastro-pub, if you can afford it, in the Home Counties and you’ll find it full of baby boomers. The people with the most problems were born later, with pension rights restricted or just not properly funded, who bought a house at the wrong time, or got sucked up in stupid investment crazes, viz dotcom and property.

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  • Old timers living the good life should be forced to pedal bikes all day in camps
    That would solve the energy crisis also

    They have spent our future on a champagne life style and will never live to see the burden they left.

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  • Things are never a simple as we want them to be.

    I’m a genuine ‘baby boomer’ born 1947 and saw flaws in this article before I posted it.

    I’ve seen little benefit from the boom years or profit from skilled hard work and long hours.

    I have three daughters and 4 going on 5 grandchildren my concerns are with them.

    I despise the attitude of some ‘greys’ who appear to accept no responsibility for the mismanagement of their community.

    Quote (genuine) I overheard a small group of 70 ish greys talking about the state of the world country whatever the other day and heard one say “glad I won’t be around in ten twenty years” that sort of crap really grinds on me. It’s a bit like ‘what did you do in the war daddy?’ We are in a war. What matters, I think, is for each of us to be, and be seen being, a force for good, whatever that is.

    There appears to be no way my daughters or even their children will have even the opportunities my wife and I had in the sixties, and I for one care, a lot. Which incidentally is why I’m here annoying people.

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  • george monsoon says:

    Its good to see some of you seasoned gents on my side. I often get “informed” by the greys in the pub of my financial mis-management and that I should save a bit harder, perhaps eat bread and butter to save for my deposit, just like they did back in the 50’s and 60’s, at which point I usually have to button my lip and walk away, otherwise it could get messy.

    The facts are these..

    I have no debt. My partner is popping out a baby any day soon and she has no debt.
    When I we get paid at the end of the month, we pool our wages together and pay off the bills. (I rent)
    What we have left over will cover us for extras like car maintenance, food odds and sods and possibly a crate of cheap beer or a bottle of wine.
    We don’t do takeouts, we can’t afford to drink in a pub. I smoke rollups which costs me about 8 quid a month (black market backie)
    My car is old and thirsty, but I cannot afford to buy a new one.

    Now.. … when my wife finally pops the baby, we are stuck. She has to give up work for several months and we will be in the sh*t.

    How the F*ck did my parents cope in the 60’s with one wage coming in and still have enough to afford a semi detatched in a desirable residence.
    They had it good. They still have it good and they know it. They took away our future and gloat at the younger generations. We have their legacy to live with for generations to come. Thanks pop!

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  • george m I have some info for you but will have to get bacl later

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  • last_days_of_disco says:

    @george monsoon

    I see the selfishness of the 1950s/60s “hippie” generation all the time. Luckily for me, my folks are luckily really old. And they come from the generation before the war. They are great.

    Really generous, funded my deposit on my first house, which I had to sell purely by luck in 2006. I am grateful now that my life had a blip in 2006 it has saved me from this disaster — I can’t say I was one of the “righteous” who sold on principle, but I am glad to have been included by luck.

    My folks have lived frugally all their lives (waste not want not) and really been generous to all their kids — which luckily includes me. They never splurged on anything, always paid for everything themselves.

    I really feel that our generation (I am in my early 30s) have more in common with our grandparents than with our parents — like I said my parents are quite old they had children late. I see it all the time. Hard working younger folks who have worked their guts out all their lives and got very little to show who are very conservative.

    This is how *all* parents should behave! This is supposed to be the norm. But the generation after the war threw all that out fo the window and lived for themselves and now we are paying for it. This housing boom is fueled by the fact that these guys have had an entitlement attitude all their lives. The NHS, the dole, etc, etc. I could go on. It makes me sick.

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  • George m – I’ll try to stick to facts you can use rather than my own opinions although I have to say It’s an area I feel very strongly about and reckon we’ve all been shafted. My three girls are ahead of you in the sh!t stakes and it bothers me a lot.

    I remember old boys telling me how things used to be and I didn’t have a clue what they were going on about. I didn’t realise they were trying to warn me. Please think carefully about the figures I’m giving you and think for yourself how and why things have moved in the direction they have.

    OK here goes. We got married in 1968, both parents were in council houses paying about £1.50 a week. That was seen by our financial advisor (my sister) as a mugs game. Private rental was out of the question. Buying a house was easy.

    Our first house, a spacious three bedroomed terrace (edge of tyneside semi rural) cost £1,650. The deposit was around £90 and the repayments around £11 per month. The lender was Northern Rock. I worked in a music shop at the time and earned £15 and later £18 per week.

    Two factors are important here

    1) the inflation

    2) the relationship between wages and house prices

    2) you can compare with current

    1) I would ask you to consider the effect of banks creating money out of thin air but not creating the interest.

    also taking onboard last_days_of_disco’s comments above, try not to blame your parents. Take a look at the BBC series The Century of Self and in particular the post WW11 activities of the US banks, corporations, government and Edward Bernays in moulding society to create selfish consumerism. I don’t agree with Adam Curtis’s analysis but it’s one place to start.

    I think you’ll find that house prices and a whole lot more have been inflated way beyond wages and earnings. This is no accident – oops there I go with my opinions.

    My blood boiled the other day when I met a woman with a son who is a friend of our daughters and found she was buying a new canal boat. “Well” she said “we were left some money by an aunt and it’s better than giving it to the kids”

    Both her son and daughter are in their 30’s and are labelled as bi-polar.

    It is really sad what is happening to ‘we the people’

    Like I said earlier though, nothings as simple as it seems, be careful not to label, box or generalise too easily.

    Hope this helps

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